Silver Prices Forecast: Struggling Amid Alternative Asset Competition

Silver Struggles Amidst Competing Asset Classes

Silver is striving to regain ground on Wednesday after hitting a two-week low earlier in the session. However, the recent price action has been less than stellar, marked by uncertainty following last Thursday’s dramatic closing price reversal top.

At 12:08 GMT, XAG/USD is trading $24.53, up $0.07 or +0.29%.

Spotty Buying Amidst Strong Competition

Despite attempts at recovery, buying interest in silver remains sporadic, particularly when compared to assets like stocks and Bitcoin, both trading near all-time highs. Speculative capital appears to favor these alternative investments over silver, despite notable central bank buying backing the precious metal.

Market Reacts to Economic Indicators

The current market behavior in silver reflects uncertainty and potential volatility, with Treasury yields and the U.S. Dollar’s performance playing pivotal roles. While higher yields limit gains, a stable dollar provides essential support to silver prices.

Anticipation of U.S. Inflation Report

This week’s moderate fluctuations in silver prices are partly attributed to reduced trading volumes ahead of the eagerly awaited U.S. inflation report and the Easter weekend. These conditions could either restrain price movements or trigger significant volatility in the market.

Monetary Policy and Dollar Index

Investor focus remains fixed on the U.S. Federal Reserve’s monetary policy stance, while the dollar index maintains stability. Recent robust U.S. economic data have cast doubts on the likelihood of immediate interest rate cuts, further influencing market sentiment.

Attention on Inflation and Economic Data

The spotlight this week falls on U.S. core inflation data, with surprises in durable goods orders bolstering the dollar. Concerns are mounting about the potential for a less aggressive easing of monetary policy than previously anticipated by the market.

Silver’s Resilience Amidst Uncertainty

Despite prevailing uncertainties, silver has managed to rally this year, driven by expectations of Federal Reserve easing and ongoing demand for safe-haven assets.

U.S. Treasury Yields and Economic Outlook

Stable U.S. Treasury yields reflect investor evaluations of the economic landscape and recent data releases. Market attention remains on new economic data and Federal Reserve officials’ remarks, with the Fed projecting three rate cuts by the end of 2024.

Short-Term Market Forecast: Data Dependent

Considering the mix of economic signals, geopolitical tensions, and expectations of Federal Reserve policy easing, the short-term outlook for the silver market leans bullish. The upcoming U.S. inflation data and central bank policy directions are expected to maintain significant influence over silver prices in the near future.

The major concern for silver traders is whether prices will be able to rally like gold, stocks and Bitcoin throughout the year, or if traders will continue to use it as a hedge against a drop in those assets.

Technical Analysis

XAG/USD is edging higher on Wednesday after testing its lowest level since March 13 earlier in the session. Although the market is up, buyers are struggling to sustain a rally since posting a dramatic closing price reversal top on March 21.

The minor range is $25.78 to $24.33. Its 50% to 61.8% retracement zone is offering resistance at $25.06 to $25.23.

The main range is $22.28 to $25.78. Its retracement zone at $24.03 to $23.62 is a key support area.

The major resistance is a pair of tops at $25.78 and $25.91. The major support is the price cluster formed by the 50-day and 200-day moving averages at $23.39 and $23.35, respectively.