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Silver Prices Forecast: Spot Silver Nears Six-Month Low as Fed Talks Rate Hikes

By:
James Hyerczyk
Published: Oct 3, 2023, 08:34 GMT+00:00

Spot silver (XAG/USD) faces a bearish tide as a strong dollar and rising Treasury yields amplify downside risks.

Silver (XAG/USD)

In this article:

Highlights

  • Spot silver (XAG/USD) faces its lowest levels in over half a year, burdened by a bullish U.S. dollar.
  • Hawkish Federal Reserve comments deepen the metal’s woes, pushing it into bearish territory.
  • Despite a unified stance on high interest rates, Fed officials are split on the need for another rate hike.
  • U.S. Treasury yields are nearing historic highs, adding to silver’s downward momentum.

Overview

Spot silver (XAG/USD) is grappling with a wave of bearish sentiment as it touches its lowest level in over six months. The strong U.S. dollar and soaring Treasury yields, fueled by hawkish Fed comments, are painting a grim picture for the metal.

The Fed’s Role

Federal Reserve officials have been unwavering in their call for high interest rates to combat inflation, intensifying the downward pressure on silver. Despite this unity, there’s an ongoing debate among officials about the need for another rate hike this year, keeping investors on their toes.

Treasury Yields and Dollar Impact

The greenback’s surge to a 10-month high and Treasury yields nearing historical peaks add another layer of woe for silver, priced in dollars and yielding no interest. This pressure was compounded when the U.S. dodged a government shutdown, leading to a sell-off in safe-haven Treasuries and a boost in yields.

Market Sentiment and Key Levels

Investors are closely watching the $20 per ounce level, previously a support but now a potential threshold for further declines. With a 45% chance of another rate hike this year, and a 42% probability of easing in H1 2024, the market is teeming with uncertainty.

Short-Term Forecast

The short-term outlook for silver is decidedly bearish. Given the Fed’s hawkish posture and strengthening economic indicators, a dip below the $20 mark could be the catalyst for further downside, making the upcoming U.S. Labor Department’s JOLTS report a must-watch event for traders ahead of Friday’s U.S. Non-Farm Payrolls report.

Technical Analysis

Daily Silver (XAG/USD)

Silver (XAG/USD) is clearly in bearish territory, as evidenced by its significant drop below the key trend line support at $22.36. Currently trading at $21.17, the asset has not only distanced itself from this pivotal level but also fallen below both the 200-Day and 50-Day moving averages.

This downward momentum is bolstered by its position beneath minor and main support levels, further solidifying the bearish sentiment. Given this technical backdrop, the likelihood of a swift reversal appears slim.

Traders should be prepared for the possibility of continued declines, as the current setup lacks bullish indicators. Overall, the stage seems set for ongoing bearish activity in the Silver 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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