Silver Prices Forecast: Firm Dollar, Rising Treasury Yields Weigh

James Hyerczyk
Updated: Jun 17, 2024, 19:33 GMT+00:00

Key Points:

  • Silver prices fall Monday with a firm U.S. dollar and investor caution around potential Fed rate cuts.
  • Hawkish comments from Fed officials, including Kashkari, suggest a December rate cut is most likely, affecting silver prices.
  • Key data this week includes U.S. retail sales figures, which could impact the dollar and, consequently, silver prices.
Silver Prices Forecast

In this article:

Silver Slips on Hawkish Fed Talk, Eyes Retail Sales Data

Silver prices fell Monday as the U.S. dollar firmed and investors awaited clearer signals from the Federal Reserve on the timing of potential rate cuts.

At 10:51 GMT, XAG/USD is trading $29.23, down $0.325 or -1.10%.

Fed on Hold, Silver on Hold?

Silver bulls are taking a cautious stance after hawkish comments from Federal Reserve officials, including Minneapolis Fed President Neel Kashkari. Kashkari suggested a December rate cut as the most likely scenario, dampening hopes for a near-term policy shift. While the Fed held rates steady last week, it did acknowledge the possibility of a single cut in 2024. However, Kashkari emphasized the need for further evidence of declining inflation before the central bank loosens its grip on monetary policy.

Treasury Yields Up, Silver Down?

U.S. Treasury yields ticked higher on Monday as the market digested Kashkari’s comments and priced in a later rate cut. Higher yields make non-interest-bearing silver less attractive compared to the returns offered by bonds.

Silver’s Potential Upside

Despite the current headwinds, silver could still benefit from a weaker dollar. If the U.S. economy weakens and expectations for future rate cuts rise, it could put downward pressure on the dollar. A weaker dollar would typically be bullish for silver prices. Additionally, lower interest rates later this year could increase the appeal of silver as an alternative investment.

Data Watch

This week’s key data point for silver is Tuesday’s U.S. retail sales figures. Strong data could bolster the dollar and weigh on silver prices. Investors are also keeping an eye on a series of speeches from Fed officials this week, as well as flash PMI data on Friday, for any clues about the future path of monetary policy.

Market Forecast: Near-Term Bearish, Long-Term Uncertain

In the near term, silver faces headwinds from a potentially stronger dollar due to delayed Fed rate cuts. However, a dovish shift in Fed policy later this year, along with a weakening U.S. economy, could create a buying opportunity for silver prices. The direction of silver in the long term hinges on the interplay between the Fed’s monetary policy and the evolving health of the U.S. economy.

Techncial Analysis

Daily Silver (XAG/USD)

XAU/USD continues to find support on the uptrending 50-Day Moving Average at $29.00. Not only is this indicator support, but also a trigger for a potential acceleration to the downside.

The psychological $30.00 level is resistance but it’s going to take a catalyst to get there. Without one, the market is vulnerable to the downside with $27.00 – $26.02 a reasonable target.

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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