Silver Prices Forecast: Traders Eyeing the Psychological $30.00 Mark

James Hyerczyk
Updated: May 17, 2024, 12:20 GMT+00:00

Key Points:

  • Silver prices approach multi-year highs, driven by rate cut expectations.
  • U.S. consumer prices rise less, increasing likelihood of September rate cut.
  • Strong demand for gold in China and steady inflation support silver prices.
Silver Prices Forecast

In this article:

Silver Prices Surge as Market Nears Key $30.00 Level

Silver prices are approaching multi-year highs, driven by growing expectations of an interest rate cut by the Federal Reserve. The market is poised for a second consecutive weekly gain, reflecting bullish sentiment as traders eye the psychological $30.00 mark.

At 12:05 GMT, XAG/USD is trading $29.80, up $0.22 or +0.73%.

Interest Rate Cut Expectations

U.S. consumer prices rose less than anticipated in April, reinforcing hopes for a September rate cut as inflation trends downward. Retail sales data, showing no growth in April, further supports the possibility of monetary easing, suggesting cooling domestic demand. The increasing likelihood of a rate cut has bolstered silver prices, with the probability of a September cut rising to 73%, up from 69% prior to the latest data.

Inflation and Consumer Price Data

The consumer price index (CPI) increased by 0.3% in April, down from 0.4% in the previous two months, indicating potential easing of inflationary pressures. The year-on-year CPI rose 3.4%, slightly lower than the 3.5% increase in March. Notably, the cost of shelter and gasoline significantly contributed to the CPI rise, while food prices remained unchanged. Core CPI, excluding food and energy, also increased by 0.3%, reflecting persistent inflation in sectors such as healthcare and personal care. These inflation trends support the case for a rate cut, which in turn could boost silver prices.

Impact of Economic Indicators on Market Sentiment

The Federal Reserve’s decision to leave its benchmark interest rate unchanged in the current range of 5.25%-5.50% underscores a cautious approach amid mixed economic signals. Analysts expect inflation to gradually move towards the Fed’s 2% target, particularly as the labor market shows signs of cooling. This scenario creates a favorable environment for silver, as lower interest rates tend to weaken the dollar and make precious metals more attractive to investors.

Global Demand and Supply Factors

Robust retail demand for gold in China and efforts to stabilize the property sector have supported silver prices. Although central bank purchases, notably by China’s central bank, slowed in April as gold prices reached a record high, the overall demand for silver remains strong. On the supply side, a 15% increase in gold prices since the beginning of 2024 has kept profit margins healthy for gold and silver miners despite rising operational costs. This factor supports continued strength in silver prices.

Market Forecast: Bullish Outlook

Given the favorable conditions for interest rate cuts and sustained demand from key markets like China, silver prices are expected to maintain their upward trend in the near term. The likelihood of monetary easing provides a bullish outlook for silver, with prices likely to remain elevated as traders anticipate further central bank actions. The market’s focus on the $30.00 level adds to the bullish sentiment, suggesting significant potential for gains in the weeks ahead.

Technical Analysis

Daily Silver (XAG/USD)

XAG/USD prices are higher on Friday, hovering just below the psychological $30.00 level, which is a potential trigger point for an acceleration to the upside.

There is no immediate threat to support or the uptrend, however, Thursday’s closing price reversal top does suggest the presence of sellers. Probably profit-takers rather than new shorts.

A trade through $29.33 will confirm the potentially bearish chart pattern. This could lead to a near-term break into a short-term retracement zone at  $27.93 to $27.48.

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.