Silver Prices Forecast: Weekly Loss Looms Amidst Hawkish Fed Remarks

Key Points

• Silver prices are rising on Friday, but set for a weekly loss due to a stronger U.S. dollar.
• Traders recalibrate rate-cut expectations, influenced by robust economic data and hawkish Fed remarks.
• Rising Treasury yields and adjusted Fed rate-cut expectations suggest a bearish outlook for silver.

Silver Market This Week

Silver prices (XAG/USD) are rising on Friday, yet they are set to mark a weekly loss. This situation is unfolding against a backdrop where the U.S. dollar strengthens and bond yields firm, following the Federal Reserve’s anticipated stance against early interest rate reductions.

Rate-Cut Expectations and Dollar Impact

Silver, traded as XAG/USD, is facing pressure as traders recalibrate their rate-cut expectations in light of unexpectedly robust economic data and hawkish remarks from Fed speakers. This adjustment is also impacting the metal’s safe-haven appeal amid Middle Eastern geopolitical risks.

The dollar index has risen nearly 1% this week, heading for a second consecutive weekly gain. A stronger dollar typically makes silver, priced in U.S. dollars, more expensive for holders of other currencies.

Treasury Yields and Economic Data

Treasury yields are continuing their upward trajectory, reacting to the latest U.S. jobs data and Federal Reserve officials’ comments. The benchmark U.S. 10-year Treasury notes have reached a five-week high of 4.1730%.

This rise in yields follows a series of strong U.S. economic indicators, including lower-than-expected weekly jobless claims and solid retail sales figures.

Fed’s Outlook and Market Reactions

Federal Reserve officials, including Governor Christopher Waller and Atlanta President Raphael Bostic, are indicating potential rate cuts, though suggesting a cautious approach. The market’s expectation for a rate cut by the March meeting has declined to 55%, its lowest point since the Fed’s last meeting in December.

Short-Term Forecast

Considering the current market dynamics, the short-term forecast for silver leans towards bearish. The strengthening dollar and rising Treasury yields, coupled with adjusted expectations for Fed rate cuts, are likely to exert downward pressure on silver prices.

Despite geopolitical concerns providing some support, the prevailing economic data and Fed commentary suggest a downtrend for silver in the near future.

Technical Analysis

Given their current relationship with the 50-day and 200-day moving averages at $23.62 and $23.58, respectively, it’s easy to conclude that Silver (XAG/USD) is in a downtrend and that these two averages are the resistance controlling the trend.

On the downside, the nearest support is $22.23. Despite today’s higher trade, the support remains within striking distance. It’s also a potential triggerpoint for an acceleration to the downside.