Silver Prices Forecast: Fed’s Actions Set the Tone in 2024

Highlights

• Silver prices remained stable in 2023, despite expectations of U.S. rate cuts and global tensions.
• Fed rate cut expectations have solidified, reducing the opportunity cost of holding silver.
• The weakening U.S. dollar enhances silver’s appeal, with potential for a cautious bullish outlook.

Silver Prices Await Fed’s Moves in 2024

Silver (XAG/USD) prices are poised to end 2023 where they began, despite factors like expected U.S. interest rate cuts and global tensions. The year brought volatility but no breakout for silver.

As 2024 approaches, all eyes are on the Federal Reserve’s moves and the possibility of lower rates. Market sentiment remains uncertain, with questions about the timing and effectiveness of rate cuts to stave off a U.S. recession.

While the CME FedWatch tool indicates expectations of a rate cut in March, jobless claims data shows mixed signals. Some believe the recession forecast is losing steam, considering faster-than-expected inflation declines.

Rate Cut Expectations Impact Silver

Expectations of U.S. Federal Reserve rate cuts have solidified, with an 88% chance of policy easing in March, reducing the opportunity cost of holding non-yielding silver. Meanwhile, the U.S. dollar is poised for its worst yearly performance in three years, enhancing silver’s appeal to holders of other currencies.

Dollar Weakens as Rate Hike Cycle Ends

The U.S. dollar’s performance is changing course, driven by expectations of Fed rate cuts after the central bank’s rate-hike cycle in 2022. Economic data indicating cooling inflation has shifted investor focus to the Fed’s potential rate-cut timeline. A weaker dollar boosts silver’s attractiveness, as it’s set to end 2023 with a loss.

Short-Term Outlook:  Vulnerable to Downside Risks

Silver enters 2024 with a cautious approach, accompanied by concerns over credit market refinancing risks. Should these risks push the Fed to implement stimulus measures swiftly, it could drive silver prices higher. This overview encompasses the current state of silver prices, the impact of rate cut expectations, the weakening U.S. dollar, and potential future challenges. The outlook for silver appears cautiously bullish, contingent on the Federal Reserve’s actions and market stability in 2024.

Technical Analysis

Silver’s current daily price of 23.72 is slightly lower than yesterday’s close at 23.97, indicating a minor decline in price from the previous trading session.

200-Day Moving Average Relationship: The current price is above the 200-day moving average of 23.66, suggesting a bullish long-term trend.

50-Day Moving Average Assessment: The current price is above the 50-day moving average of 23.61, indicating a positive short-term trend.

Support and Resistance Levels: The current price is above the minor support level of 23.55, which could act as a pivot point. The main support at 22.23 remains untouched. On the upside, the price is below the minor resistance level of 24.50 and significantly below the main resistance at 25.91.

Trend Lines: Since the price is above the trend line resistance at 23.55, it suggests a potential for an upside acceleration. However, crossing to the weak side of this trend line will indicate a shift in sentiment to the downside.

Market Sentiment: Considering the price’s position above key moving averages and support levels, the current market sentiment appears cautiously bullish with a potential for upward momentum if it can break through resistance levels. It’s also vulnerable to a break under 23.52.