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Silver Prices Forecast: Rally Underpinned by Fed Rate Cut Speculation, Inflation Slowdown

By:
James Hyerczyk

Silver (XAG/USD) prices climb for a third week amid US inflation decline, Fed rate cut expectations, and Powell's anticipated remarks.

Silver Prices Forecast

In this article:

Highlights

  • Silver climbs amid lower US inflation, Fed rate cut chances.
  • Market reacts to potential end of Fed’s rate hikes.
  • XAG/USD buoyed by global economic shifts, awaits Powell’s insights.

Silver’s Uptrend Amid Economic Optimism

Silver (XAG/USD) prices are gearing up for a third successive weekly increase, a trend fueled by the latest U.S. inflation data and growing anticipation of a Federal Reserve rate cut. The market’s optimism has been further heightened ahead of the upcoming remarks from Federal Reserve Chair Jerome Powell.

Economic Indicators and Federal Reserve Policy

Recent data showing a modest rise in U.S. consumer spending and the lowest annual inflation increase in over two years are painting a picture of easing inflationary pressures. This scenario, along with a more relaxed labor market, is increasingly viewed as a signal that the Federal Reserve might conclude its interest rate hikes, leaning towards potential rate cuts. Statements from Federal Reserve officials have supported this outlook.

Market Sentiment and Treasury Yields

The likelihood of a rate cut by March 2023, as indicated by the CME’s FedWatch Tool, has risen significantly, reflecting a shift in market sentiment. This shift is mirrored in Treasury yields, with the 10-year yield climbing to 4.34%, a notable decrease from last month’s peak, and the 2-year yield increasing to 4.701%.

Inflation Metrics and Rate Hike Pause

The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures price index, aligns with the expectations of slowing inflation. Federal Reserve Governor Christopher Waller’s recent remarks reinforce the belief that the Fed may be nearing the end of its rate hike cycle.

Global Economic Outlook and Silver Market

As global economic indicators point towards a potential halt in rate hikes and possible future cuts, the silver market remains responsive. Seasonal trends favoring silver gains in the late year add to this buoyancy. The market eagerly awaits Jerome Powell’s comments, which are expected to provide further clarity on the rate outlook and influence the direction of silver prices. With the Federal Open Market Committee unlikely to tighten policy further, the current trend appears favorable for silver in the near term.

Technical Analysis

Daily Silver (XAG/USD)

The current daily price of silver (XAG/USD) at 25.28 is positioned above both the 200-day and 50-day moving averages, at 23.41 and 22.95 respectively, indicating a strong bullish trend. This price is also above the main support level of 23.55 and minor support of 24.49, reinforcing the bullish sentiment.

The positioning significantly above these moving averages and support levels suggests robust upward momentum in the market.

With the absence of specified minor and main resistance levels, the potential for further upside movement seems likely, contingent on market factors and investor sentiment.

Overall, the market sentiment for silver appears decidedly bullish, considering its current standing relative to these technical indicators.

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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