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Silver Prices Forecast: Bearish Trends Amid Key Economic Events

By:
James Hyerczyk
Published: Jun 11, 2024, 11:24 GMT+00:00

Key Points:

  • Silver prices are under pressure after Friday's sell-off, trading near the 50-day moving average.
  • Investors brace for the inflation report; a high CPI could push silver below $28.84.
  • The Fed's June meeting may influence silver, with fewer rate cuts expected amid steady core inflation.
Silver Prices Forecast

In this article:

Silver Market Update

Silver prices are experiencing downward pressure on Tuesday, following a sharp sell-off on Friday. The short-term trend is down, but prices remain slightly above the crucial 50-day moving average of $28.84. This level, which has supported the market since March 1, could trigger a significant decline if breached. The U.S. consumer inflation report and the Federal Reserve’s rate cut decision on Wednesday are potential catalysts.

At 11:12 GMT, XAG/USD is trading $29.20, down $0.55 or -1.84%.

Dollar Strength and Inflation Report

On Tuesday, silver prices dropped as the U.S. dollar gained strength. A 0.1% rise in the dollar increases silver’s cost for non-dollar holders, reflecting their inverse relationship. Investors are strategically positioning themselves before the key inflation report and the Fed’s interest rate forecasts. A higher-than-expected Consumer Price Index (CPI) could delay rate cuts, pushing silver prices below the 50-day moving average.

Federal Reserve Meeting and Interest Rates

The Federal Reserve’s June meeting begins on Tuesday, with a policy decision expected on Wednesday. The Fed is anticipated to maintain current interest rates but may project fewer rate cuts due to persistent inflation. Higher rates make non-yielding assets like silver less attractive, as investors prefer bonds and other yielding investments. Recent declines in U.S. Treasury yields underscore the market’s cautious sentiment ahead of the Fed’s decision and economic data releases.

Market Sentiment and Forecast

The U.S. dollar index remained steady at 105.16 after reaching 105.39 on Monday, its highest since May 14. Economists expect headline U.S. inflation to ease slightly, but core price pressures are likely to stay steady. No policy changes are expected at the Fed’s meeting conclusion, but officials will update their economic projections. In March, projections included three quarter-point rate cuts, but recent hawkishness suggests fewer cuts. Current market pricing indicates only 37 basis points of cuts by December.

Short-Term Outlook

Given the U.S. dollar’s strength, the upcoming CPI report, and the Fed’s likely stance on interest rates, the short-term outlook for silver is bearish. If inflation data and Fed projections indicate a delay in rate cuts, silver prices could fall below the critical support level of $28.84. Traders should closely monitor these developments as they significantly impact the silver market.

In conclusion, with the economic indicators and Federal Reserve’s decisions looming, silver traders should prepare for potential downside risks. The market’s reaction to the upcoming data will be crucial in determining the short-term direction of silver prices.

Technical Analysis

Daily Silver (XAG/USD)

XAG/USD is lower on Tuesday, poised to challenge the 50-day moving average at $28.84. This level is crucial for the intermediate market direction. It has provided upward guidance for over three months, so if it fails, we could see an acceleration to the downside with $26.00 as the next key target price.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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