Silver Prices Forecast: Fed’s PCE Focus Will Influence XAG/USD’s Outlook

Recent Uptrend in Silver

Silver’s recent performance showcases a consistent uptrend, with gains in both the monthly and quarterly frames. Despite lagging behind gold, equities, and cryptocurrencies, silver remains a strong contender in the investment sphere. It’s essential to understand that silver is often used as a hedge against the volatile nature of these riskier assets.

On Thursday, XAG/USD settled the week at $24.97, up $0.31 or +1.27%.

Gold’s Influence and Interest Rate Expectations

The record-breaking surge in gold prices has had a ripple effect on silver. This uptrend is further fueled by the anticipation of U.S. interest rate cuts and robust demand for safe-haven assets like gold, which indirectly benefits silver. The future trajectory of silver depends significantly on the Federal Reserve’s decisions regarding interest rates.

Global Tensions and Inflation Impacts

Global geopolitical unrest is pushing investors towards safe-haven assets, benefiting both gold and silver. While inflation concerns are evident, there’s speculation about central bank actions influencing gold and consequently silver prices. The U.S. core personal consumption expenditures (PCE) price index serves as a vital indicator of the Fed’s policy direction, affecting silver market trends.

Insights from the PCE Report

The PCE report indicates a 2.8% increase in core inflation, suggesting the Federal Reserve might hold off on rate cuts for now. Rising energy costs and consumer spending point to ongoing inflation pressures. The market’s anticipation aligns with the Federal Reserve’s indication of holding rates, with potential rate reductions starting in June, as inferred from the projected three cuts this year.

Market Outlook for Silver

In the near term, silver may face some selling pressure. However, the direction of Federal Reserve policies, influenced by the PCE report and overall inflation trends, will play a crucial role in shaping investor sentiment. A perceived aggressive rate cut cycle could provide bullish momentum for silver. On the other hand, a more restrained approach by the Fed could moderate silver’s ascent. The current market environment for silver is marked by a balance of optimism and vigilant observation, considering the complex interplay of monetary policy, global economic conditions, and investor behavior.

Technical Analysis

Silver (XAG/USD) is in an uptrend but struggling. However, conditions could become more bullish once the significance resistance at $25.91 is taken out with conviction. In the meantime, the intermediate and long-term uptrends are expected to continue as long as the market holds above the 50-day moving average at $23.44 and the 200-day moving average at $23.36, respectively.