Silver Prices Forecast: Traders Battling Middle East Tensions, Fed Decisions

Highlights

• International calls for Middle East ceasefire mute XAG/USD rally.
• Sustained high interest rates through 2024 could reduce silver’s appeal.
• Market focus on upcoming U.S. GDP and PCE price index releases.

Geopolitical Factors and Safe-Haven Flows

Silver’s (XAG/USD) price movements in recent times has been oscillating between influences from geopolitical tensions and key economic indicators. The ongoing Middle East conflict has served as a catalyst for safe-haven flows into silver, although gains have been capped as demand shows signs of fatigue.

International calls led by the U.S. and Russia for a ceasefire between Israel and Hamas also muted the rally. Despite rallying over 11% in ten days and hitting a resistance level at $24.00, the metal may struggle to break through this ceiling, especially as silver bulls might consider buying dips at the $22.00 mark.

The Macroeconomic Counterweight

In the broader economic landscape, macroeconomic indicators are serving as counterweights to geopolitical tensions. Recent data highlighting a 19-month high in new-home sales has emboldened expectations of sustained high interest rates through 2024. This outlook for interest rates could, in turn, dampen silver’s allure, as the metal offers no yield. The Federal Reserve, eyeing inflation control, sees higher rates as a viable path, further complicating the picture for silver investors.

Upcoming Key Economic Releases

While intraday moves are becoming less consequential due to looming U.S. GDP numbers and an upcoming speech from Federal Reserve Chair Jerome Powell, all eyes are on key economic releases. The Personal Consumption Expenditures (PCE) price index, a crucial inflation indicator, will be released this Friday and could strongly influence the Federal Reserve’s rate decision next week.

Short-Term Forecast: Volatile

In summary, silver is caught in a tug-of-war between geopolitical uncertainties and economic fundamentals. Given the upcoming PCE data and the Fed’s monetary policy direction, along with the ever-evolving geopolitical landscape, traders should brace for continued volatility in the silver market.

Technical Analysis

The current daily price of silver (XAG/USD) at 23.07 is below the 200-day moving average of 23.30 but above the 50-day moving average of 22.96. This mixed signal suggests short-term bullish momentum but with caution advised for longer-term perspectives.

The asset finds itself between minor support at 22.23 and minor resistance at 23.55, providing room for price oscillation. A break above trend line resistance at 24.16 could invite more bullish activity, with 24.50 as the main resistance level.

Conversely, main support at 20.66 serves as a downside buffer. In summary, the market sentiment leans cautiously bullish, with an eye on upcoming resistance levels.