Silver Prices Forecast: XAG/USD Eyes Weekly Gain Amid Strong U.S. Economic Data

Key Points

• Silver set for weekly advance despite robust U.S. economy.
• Investor interest spikes in silver’s favorable price range.
• Fed meeting outcome crucial for silver’s short-term direction.

Weekly Gains Despite Economic Strength

Silver is heading towards a weekly gain, contrasting with a resilient U.S. economy that maintains the dollar near multi-week highs. This economic strength might be tempering silver’s potential, especially as rate cut expectations get pushed further into the year. Despite this, silver is outpacing gold, largely due to its appeal as a relatively inexpensive investment.

At 08:51 GMT, XAG/USD is trading $22.87, down $0.05 or -0.21%.

Investor Sentiment and Price Range

Investor interest in silver, particularly within the $22.00 to $21.84 range, has been noticeable. The market is now watching to see if this interest can propel prices over the $23.75 threshold, which could trigger a strong rally, or if prices will fall back into the lower $20’s.

Economic Growth and Inflation Data

The U.S. economy’s faster-than-expected growth in Q4, with a 3.3% annualized increase in GDP, is coupled with subdued inflationary pressures. Despite robust consumer spending, inflation measures like the core PCE price index have shown only moderate increases, suggesting that inflationary concerns might not be as pressing as previously thought.

Labor Market and Federal Reserve’s Policy

Recent labor market data showing an uptick in jobless claims, along with controlled inflation, implies that the Federal Reserve might maintain its current policy stance. The market is now focusing on the upcoming Fed meeting and Chair Jerome Powell’s comments, with a high likelihood of a rate cut being deferred to May.

Short-Term Forecast for Silver

In the short term, silver (XAG/USD) prices may benefit from these market conditions, with lower interest rates potentially reducing the opportunity cost of holding silver. However, the metal’s future price movements will be heavily influenced by the Fed’s policy direction and ongoing economic indicators.

Technical Analysis

Despite its early struggles on Friday, Silver (XAG/USD) is poised to close higher for the week after bouncing off major support in the $22.00 to $21.88 range.

Although this “technical bounce” hasn’t been enough to change the main trend to up, it may have created the momentum needed to challenge the cluster of resistance including the 200-day moving average at $23.51, the minor resistance at $23.55 and the 50-day moving average at $23.60.

Trader reaction to this area will go a long way in determining whether this current rally has legs, or if it will just fizzle out, leading to more downside pressure.