Silver Prices Forecast: Fed Minutes Expected to Influence This Week

James Hyerczyk
Published: May 19, 2024, 06:25 GMT+00:00

Key Points:

  • Silver gains on China's property measures, U.S. rate cut hopes
  • China injects $138 billion to stabilize property sector
  • U.S. CPI data supports interest rate cut speculation
Silver Prices Forecast

In this article:

Silver Hits 11-Year High

Silver ended last week on a positive note, driven by significant developments in China and the U.S. The market posted its second consecutive weekly gain, bolstered by China’s aggressive measures to stabilize its property sector and renewed hopes for U.S. interest rate cuts following a favorable consumer inflation report.

Last week, XAGUSD settled at $31.50, up $3.32 or +11.80%.

Weekly Silver (XAG/USD)

China’s Stimulus Measures

China, a major consumer of silver and industrial metals, announced historic measures to stabilize its property sector. These steps included the central bank providing 1 trillion yuan ($138 billion) in additional funding, easing mortgage rules, and local governments purchasing some apartments. This intervention aims to address waning demand for new and old apartments, falling prices, and a growing stock of unsold homes.

The CSI 300 Real Estate index of shares surged 9.1% on the announcement, reflecting optimism among investors. Analysts, however, remain cautious about whether government purchases will stimulate private sector demand. The policy is seen as a significant move to clear inventory and support developers’ financial stability, though it does not fully address the lack of private sector confidence.

U.S. Inflation and Rate Cut Expectations

In the U.S., consumer inflation data for April showed a slower-than-expected increase, reinforcing market expectations for potential interest rate cuts by the Federal Reserve. The consumer price index (CPI) rose by 0.3% in April, down from 0.4% in March, and the year-on-year increase slowed to 3.4%. This data, coupled with flat retail sales, suggests cooling domestic demand, which is a positive sign for those anticipating rate cuts.

Traders now expect the Fed to cut rates twice this year, likely starting in November. Lower interest rates enhance the appeal of non-yielding assets like silver, contributing to the recent price rally.

London Gold Benchmark Influences

The London Bullion Market Association (LBMA) reported that gold reached a record high of $2402.60 per troy ounce by the end of the week. Silver prices also benefited from these market conditions, reflecting the combined effects of China’s economic measures and the anticipation of U.S. interest rate cuts.

Weekly Market Forecast

Looking ahead, silver is expected to maintain its upward momentum. The Fed’s cautious stance on interest rates, alongside positive signals from China’s property market interventions, supports a bullish outlook.

The metal is likely to test minor resistance at $33.00 in the short term, with potential to reach $35.40. However, support is firm at $29.80, providing a solid base for future gains.

Traders should watch for further economic data and Fed communications, which will play crucial roles in shaping the metal’s trajectory in the coming weeks.

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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