Silver Prices Forecast: XAG/USD Rises Amid Geopolitical Concerns

James Hyerczyk
Published: Apr 17, 2024, 12:22 GMT+00:00

Key Points:

  • Silver climbs despite rising dollar and Treasury yields.
  • Fed Chair Powell insists on restrictive policy to manage inflation.
  • Central banks' gold buying provides stability against price drops in silver.
Silver Prices Forecast

In this article:

Consolidation with Upside Bias

Silver prices are higher on Wednesday, buoyed by safe-haven demand amid escalating tensions in the Middle East. Despite this, the dollar and Treasury yields also rose, influenced by a stronger-than-anticipated increase in U.S. retail sales for March. This complex interaction of geopolitical and economic factors underscores the current volatility in the silver market.

At 12:04 GMT, XAG/USD is trading $28.51, up $0.40 or +1.44%.

Geopolitical Impact on Silver

The recent military actions between Iran and Israel, marking the first such aggression in over three decades, have stoked fears of a broader conflict, prompting investors to turn to silver as a safe-haven asset. The movement in silver prices is predominantly driven by these geopolitical events.

Economic Indicators and Federal Reserve’s Stance

The surge in U.S. retail sales indicates a robust economic momentum as Q1 concluded, which has adjusted expectations around the Federal Reserve’s monetary policy. The market has now scaled back its anticipation of interest rate cuts, expecting fewer adjustments by year-end. Federal Reserve Chair Jerome Powell emphasized the necessity of maintaining restrictive monetary policy longer to manage inflation and economic strength, which has influenced both the dollar’s strength and Treasury yields.

Challenges to Upward Momentum

In the short term, silver prices might face downward pressure as the initial geopolitical premium dissipates. However, ongoing central bank purchases of gold bullion provide a floor to potential declines in silver. The strategic nature of these purchases often makes them less sensitive to fluctuations in silver prices. Looking forward, the sustained high interest rate environment in the U.S. and a robust dollar may continue to challenge silver’s upward momentum.

Short-Term Market Forecast

Given the Federal Reserve’s current stance on interest rates and the ongoing economic strength in the U.S., the outlook for silver remains neutral in the near term. The dual pressure from a stronger dollar and higher yields could temper gains from safe-haven demand, likely leading to a stabilization or slight decrease in silver prices in the coming weeks.

Technical Analysis

Daily Silver (XAG/USD)

XAG/USD is edging higher on Wednesday as traders attempt to recover from the damage caused by last Friday’s dramatic closing price reversal top.

Support is a pair of minor bottoms at $27.59 and $27.53. A failure to hold this area could trigger a break into $26.90 and $26.17. However, this move would likely set up a buying opportunity since the market is well-supported by the uptrending 50-day moving average at $24.70.

On the upside, minor resistance is a pivot at $28.70. Overcoming this level will indicate the presence of buyers .

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.

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