Silver Prices Forecast: Is Silver Set for Further Declines Amid Risk-On Trends?

James Hyerczyk
Published: May 5, 2024, 10:26 GMT+00:00

Key Points:

  • Silver fell sharply despite U.S. employment data missing expectations.
  • Silver's near-term prospects tied to Federal Reserve's forthcoming decisions.
  • XAG/USD retreats as traders pivot to riskier assets.
Silver Prices Forecast

In this article:

Silver Market Weekly Recap

Silver prices declined further this week, hitting a one-month low despite weaker-than-expected U.S. employment data, which typically bolsters demand for safe-haven assets like precious metals. This continued downtrend follows a substantial rally last month, with geopolitical tensions waning and traders taking profits.

Last week, XAG/USD settled at $26.56, down $0.66 or -2.44%.

Weekly Silver (XAG/USD)

Economic Indicators and Silver’s Reaction

The U.S. Non-Farm Payrolls report initially prompted a rise in silver prices with job growth falling short of expectations, showing only 175,000 new jobs compared to the anticipated 243,000. This miss led to a brief increase in silver’s appeal as a safe haven, compounded by the unemployment rate’s unexpected rise to 3.9% from a predicted 3.8%. Despite these factors, gains in silver were quickly reversed as the market adjusted to broader economic signals. U.S. Treasury yields fell, with the 10-year note dropping 7 basis points to 4.5%, which initially suggested a favorable shift for bullion, but interest soon pivoted to higher-risk assets.

Federal Reserve’s Monetary Policy

Last week, the Federal Reserve held interest rates steady, signaling a cautious approach toward economic growth and inflation, which aligned with market expectations. Fed Chair Jerome Powell indicated the possibility of policy adjustments in response to a weakening labor market. Although rate cuts typically benefit non-yielding assets like silver, the muted response from the silver market suggests a focus on potential economic recovery and higher returns from riskier investments.

Market Sentiment and Impact on Silver

Despite conditions that might traditionally boost safe-haven assets, silver prices are currently down 12.72% from their recent peak. The market’s preference for risk over safety has significantly influenced silver’s pricing, with the metal retreating from last month’s high driven by geopolitical issues and central bank acquisitions.

Short-Term Market Forecast

The immediate support level for silver is now positioned around $25.00 per ounce. Looking ahead, the trend of silver prices will likely hinge on the Federal Reserve’s next moves in response to economic indicators and inflation pressures. If the Fed opts for a more accommodative monetary stance, silver could see increased demand as a safe investment. Conversely, a sustained ‘risk-on’ sentiment across financial markets could keep silver under pressure, potentially testing or even breaking below the key $25.00 support threshold.

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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