Silver Prices Forecast: Underpinned by Dovish Fed, Falling Yields and Dollar

Highlights

• Silver posting inside move, hinting at continued rise.
• Fed’s policy shift impacts Treasury yields, silver prices.
• Dollar’s decline boosts silver amid central bank policy changes. 

Silver Consolidates with Inside Move Amid Monetary Policy Shifts

Silver (XAG/USD) is exhibiting an inside move in trading on Friday, indicating a contraction in volatility. As of 08:32 GMT, the metal is slightly higher, trading at $24.17, consolidating within the range set by the previous day.

Federal Reserve’s Policy Impact

The Federal Reserve’s latest policy meeting marks a pivotal shift, signaling the potential end of its monetary tightening cycle. Fed Chair Jerome Powell’s remarks suggest a move towards reducing borrowing costs, with the majority of Fed policymakers anticipating lower interest rates by the end of 2024.

Treasury Yield Fluctuations

Post-Fed announcement, Treasury yields have dropped to multi-month lows. The notable decrease in the yield of the 2-year Treasury note, which is a gauge for Fed rate expectations, mirrors a de facto rate cut. The 10-year Treasury note yield, a key indicator for borrowing costs, has also seen a significant decline.

US Dollar Dynamics and Global Currency Reactions

In response to the expected rate cuts, the U.S. dollar has reached a four-month low, resulting in a considerable weekly drop in the dollar index. This shift has positively impacted the euro and pound, highlighting the influence of global central bank decisions on currency markets.

Silver’s Market Outlook

This backdrop of the Fed’s dovish turn and decreasing Treasury yields sets a supportive stage for silver prices. Current market sentiment points towards a high probability of a Fed rate cut by March, aligning with a global trend towards softer monetary policies.

Given this environment, silver’s short-term outlook appears bullish, with the precious metal’s price movement currently constrained by the inside day pattern, typically indicative of a continuation of the prevailing trend.

Technical Analysis

Silver (XAG/USD) is currently trading at $24.17, matching the previous day’s close, indicating a period of consolidation in the market. This price is comfortably above both the 200-day and 50-day moving averages, set at 23.57 and 23.31 respectively, suggesting an overall bullish trend.

The current price is nearing the minor resistance level at 24.50, and a break above this could signal further upward momentum, potentially testing the main resistance at 25.91. However, it remains above the minor support level, which coincides with the 200-day moving average, providing a solid base.

The market sentiment for silver, based on these technical indicators, leans bullish, with room for potential upward movement if it successfully breaches the nearby resistance levels.