Silver Price Forecast: Steady as Traders Brace for Fed’s Policy Decision

Highlights

• Comex silver starts cautiously due to Fed decision.
• Dovish Fed stance may support silver, profit-taking possible.
• Hawkish Fed could lead to silver sell-off.

Overview

Comex silver prices experienced a hesitant start on Wednesday, as traders approached the market with caution in anticipation of the U.S. Federal Reserve’s policy decision later in the day. This cautious sentiment led to relatively thin trading conditions, allowing some traders to take advantage of the price fluctuations.

Dovish Fed Anticipated

The outcome of the Federal Reserve’s decision holds significant implications for silver prices. Should the Fed adopt a dovish stance, pausing rate hikes, it is expected to provide support to silver prices and potentially drive them higher. However, the majority of traders already hold this belief, which could mean that the positive impact has already been factored into the current prices. Consequently, profit-taking may ensue in this scenario. But, a more surprising announcement of a prolonged rate pause throughout the year could trigger a bullish rally in prices.

Hawkish Fed Could Encourage Profit-Taking

Conversely, a hawkish Fed, or one failing to indicate a pause in rate hikes, would likely result in a sell-off in silver prices. The broader market sentiment indicates a desire for an extended rate pause in 2023, but there remains a possibility of a rate hike in September or November, as suggested by CME’s Fedwatch tool.

Loose Fed Will Support Uptrend

While silver is sensitive to rising interest rates due to the opportunity cost of holding non-yielding bullion, the medium-term outlook remains positive. As we approach the final phase of the Fed’s tightening cycle, the precious metal may still retain its upward trend.

Yields, Dollar, Economic News to Influence

The dollar and U.S. Treasury yields hovering around their two-week highs have weighed on zero-interest-bearing silver. The market is keeping a close eye on policy guidance from the European Central Bank and eagerly awaits second-quarter U.S. GDP data on Thursday. The expected rise in the U.S. economy during April-June could influence silver prices.

Additionally, traders are keenly monitoring the June personal consumption expenditures (PCE) print, a crucial inflation gauge preferred by the Fed, due on Friday. The report’s data will likely have an impact on market sentiment and could influence silver prices further.

Short-Term Outlook:  Cautious Uptrend

In conclusion, the Comex silver market is treading cautiously as it awaits the Federal Reserve’s policy decision. The potential for both bullish and bearish outcomes exists, with traders closely watching economic data and the Fed’s future guidance to determine silver’s short-term trajectory.

Technical Analysis

Comex Silver is showing a neutral sentiment with slight bullish tendencies. The current price at 24.865 is marginally higher than the previous 4-hour close. indicating a modest upward movement. Although the 200-4H moving average at 23.808 suggests a positive signal, the 50-4H moving average at 25.016 indicates a potential bearish trend. The 14-4H RSI hovers around 52.09, reflecting balanced momentum.

The main support area lies between 23.105 and 23.330, while the main resistance area is at 25.970 to 26.435. With the market trading within this range, traders should closely monitor these levels for potential breakouts.  Meanwhile, the current chart pattern suggests heightened volatility.