Silver Prices Forecast: Investors Awaiting Guidance from Fed Minutes

James Hyerczyk
Updated: May 22, 2024, 13:56 GMT+00:00

Key Points:

  • Silver prices are dropping as investors await the Fed’s policy meeting minutes.
  • Rising Treasury yields and cautious Fed stance put pressure on silver prices.
  • Investors adjust rate cut expectations, watching upcoming inflation data closely.
Silver Prices Forecast

In this article:

Lower as Investors Await Fed Minutes

Silver prices are declining on Wednesday as investors are preparing for the release of the Federal Reserve’s most recent policy meeting minutes, seeking insights on the timing of potential interest rate cuts. Nonetheless, the market remains well-supported by strong investor demand, especially with gold hovering near a record high.

At 11:50 GMT, XAG/USD is trading $31.61, down $0.37 or -1.16%.

Silver Market Consolidation

Silver is currently consolidating after a significant rally. In the short term, prices may not rise further without additional support from a weakening dollar, particularly as investors are focusing on the potential for rate cuts. Despite this, the market is showing strong resilience with a persistent “buy on dip” mentality among traders.

Fed’s May Policy Meeting

The minutes from the Fed’s May policy meeting, scheduled for release at 18:00 GMT, are highly anticipated. Recent economic data is indicating a downtrend in inflation, but Federal Reserve officials are urging patience. They are suggesting waiting several more months to ensure inflation is on a stable path towards the 2% target before cutting rates. Higher interest rates are increasing the opportunity cost of holding non-interest-bearing assets like bullion, traditionally seen as an inflation hedge.

Rising Treasury Yields

U.S. Treasury yields are rising on Wednesday following comments from Federal Reserve speakers about the outlook for inflation and interest rates. Fed Governor Christopher Waller is emphasizing the need for more data showing easing inflation and economic conditions before supporting a rate cut. Other officials, including Boston Fed President Susan Collins and Atlanta Fed President Raphael Bostic, are echoing this sentiment, stressing the importance of patience.

Steady Dollar Amid Rate Cut Speculation

The dollar is remaining steady against major currencies as the market is digesting the Fed officials’ cautious stance and awaiting the Fed minutes for further guidance. Investors are adjusting their expectations for rate cuts, with current bets reflecting about 43 basis points of easing compared to 52 basis points last week. Fed Governor Waller is reiterating the need for sustained positive inflation data before policy easing, aligning with Cleveland Fed President Loretta Mester’s timeline.

Market Forecast

In the short term, silver prices may face downward pressure due to the Fed’s cautious approach to rate cuts and rising Treasury yields. However, the fundamental outlook is remaining positive, supported by ongoing central bank buying of gold which underpins demand. Traders should watch upcoming inflation data, particularly the PCE index due on May 31, for further market direction. Overall, the market sentiment is remaining cautiously bullish with potential for dips being seen as buying opportunities.

Technical Analysis

Daily Silver (XAG/USD)

XAG/USD is lower on Wednesday as bullish investors await the next catalyst that could drive prices significantly higher

Overtaking long-term resistance at $32.48 will be a sign of strength, while a breakout over $32.52 will signal a resumption of the uptrend. If this move is backed by above average trading volume, we could see an acceleration toward another long-term resistance level at $34.35.

If current long investors are forced out, we could see a huge break since the market isn’t showing strong support until the 50-day moving average at $27.30.

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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