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Silver Prices Forecast: Rate Uncertainty Limits Gains, Geopolitics Supportive

By:
James Hyerczyk
Published: Apr 18, 2024, 11:07 GMT+00:00

Key Points:

  • Silver's current chart pattern signals volatility and investor hesitation.
  • Rising geopolitical tensions enhance silver's attractiveness as a safe-haven.
  • Continuous high interest rates suppress silver's investment appeal.
Silver Prices Forecast

In this article:

Silver futures have shown a degree of volatility this week, encapsulated by a mixed movement between an initial rally and subsequent consolidation. The recent trading pattern suggests investor indecision, possibly indicating upcoming volatility. This wavering comes in the wake of a chart pattern last Friday that hinted at a bearish downturn, which appears to have stymied the rally’s momentum.

At 10:50 GMT, Silver (XAG/USD) is trading $28.48, up $0.26 or +0.92%.

Geopolitical Influences

Adding complexity to the market’s behavior, geopolitical tensions in the Middle East have escalated, particularly involving Iran and Israel. These developments have bolstered silver’s appeal as a safe-haven asset, countering some downward pressure from other economic indicators. The unfolding situation could sustain a demand for silver as a protective investment against global instability.

Interest Rates and Economic Indicators

Conversely, the prospect of enduring high U.S. interest rates is exerting downward pressure on silver prices. The Federal Reserve’s recent signals suggest that rates might remain elevated longer than previously anticipated, diminishing the allure of non-yielding assets like silver. Moreover, disinvestment in gold-backed ETFs continues, though this also means there’s limited scope for significant sell-offs and potential room for new investment. This could help to underpin silver prices.

Treasury Yields and Dollar Strength

The U.S. Treasury yields have shown slight declines, reflecting investor caution and a reassessment of the rate outlook based on fresh economic data and Federal Reserve comments. Meanwhile, the dollar’s strength, driven by robust U.S. economic data and persistent inflation, continues to influence global currency trends, impacting precious metals like silver.

Short-Term Market Forecast

In the short term, silver prices may face further consolidation with a possible pullback, influenced by high U.S. interest rates and a strong dollar. However, geopolitical risks could provide some upward support. Overall, the market sentiment leans slightly bearish given the macroeconomic headwinds, unless geopolitical tensions escalate significantly, altering the current investment climate.

Technical Analysis

Daily Silver (XAG/USD)

Silver (XAG/USD) is in an uptrend, but last Friday’s closing price reversal top suggests the selling may be greater than the buying at current price levels.

Taking out the pair of minor bottoms at $27.59 and $27.53 will reaffirm the potentially bearish chart pattern. This could trigger a break into the support zone at $26.90 to $26.17.

The short-term range is $29.80 to $27.59. Its pivot at $28.695 is resistance. It’s also controlling the near-term direction of the market.

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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