Silver Prices Forecast: Long-Term Outlook Bullish Despite Today’s Pause

James Hyerczyk
Updated: May 21, 2024, 13:52 GMT+00:00

Key Points:

  • Silver prices fall after reaching multi-month highs, influenced by Fed comments and profit-taking.
  • Federal Reserve officials emphasize need for more inflation data, impacting market expectations.
  • Recent inflation data shows mixed results, prompting traders to watch Fed signals closely.
Silver Prices Forecast

In this article:

Silver Prices Dip on Cautious Fed Remarks and Profit-Taking

Silver prices fell on Tuesday after hitting a multi-month high in the previous session. The decline followed cautious comments from U.S. Federal Reserve officials and profit-taking by investors. The market is now eyeing the Federal Reserve’s upcoming meeting minutes for further direction.

At 12:00 GMT, XAG/USD is trading $31.81, down $0.013 or -0.04%.

Key Developments

Silver, often seen as a beta for gold, has strong fundamentals and growing industrial demand, making it an attractive investment, according to ANZ commodity strategist Soni Kumari. However, the recent momentum loss is attributed to traders reducing positions ahead of the Federal Reserve meeting minutes, anticipating typical market volatility.

Fed’s Cautious Stance

Federal Reserve policymakers, including Vice Chair Philip Jefferson and Vice Chair of Supervision Michael Barr, emphasized the need for more evidence of inflation returning to the 2% target before considering rate cuts. This cautious approach has tempered market expectations. U.S. Treasury yields remained stable as investors weighed the implications of the Fed’s cautious stance on future interest rates and inflation trends.

Inflation and Economic Data

Recent inflation data showed the consumer price index for April rising by 0.3% month-over-month and 3.4% year-over-year. While these figures were in line with expectations, the Fed officials noted that it is too early to determine the sustainability of the disinflationary trend. This sentiment was echoed by Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly, both of whom stressed the importance of ensuring inflation is on a sustained path towards the 2% target.

Market Forecast

Despite today’s mild pullback, the long-term outlook for silver remains supported by ongoing geopolitical and financial uncertainties. Market sentiment has shifted, with traders now expecting the first Fed rate cut in September instead of June, reflecting the Fed’s cautious approach. Traders should closely monitor upcoming economic indicators and Fed statements for additional insights into the timing of any policy changes.

Daily Silver (XAG/USD)

XAG/USD is edging lower on Tuesday after hitting a more than 11 month high the previous session. If today’s inside move holds then it will indicate investor indecision and impending volatility.

The key level to overcome is yesterday’s high at $32.52. This will also put it on the strong side of the January 2013 main top at $32.48. The daily chart indicates this market has room to run with $34.35 the next target.

On the downside, the nearest support is the uptrending 50-day moving average at $27.15. This indicator is controlling the intermediate trend.

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.

Did you find this article useful?