Silver Prices Forecast: XAG/USD Rises Amid Weaker Dollar, US Inflation Slowdown

By:

Published: Nov 15, 2023, 08:22 GMT+00:00

Silver (XAG/USD) climbs as U.S. dollar weakens and inflation data signals Federal Reserve's rate hike pause.

Highlights

Silver prices rise amid weaker U.S. dollar, falling bond yields.
U.S. inflation slowdown spurs speculation on Fed’s rate hikes.
Dollar’s fall boosts silver’s accessibility to global investors.

Silver’s Price Movement Amid Economic Indicators

Silver (XAG/USD) prices saw an uptick on Wednesday, influenced by a weaker U.S. dollar and falling bond yields. This rise in prices came in response to U.S. inflation data indicating a slowdown, which in turn fueled speculation about the Federal Reserve’s future rate hikes. The data revealed that U.S. consumer prices remained unchanged in October, marking the smallest annual increase in underlying inflation in two years.

Dollar Weakness and Treasury Yield Impact

The softer-than-expected inflation figures caused the dollar index to drop to a more than two-month low. This decline in the dollar’s value made silver more accessible to investors using other currencies. Concurrently, benchmark U.S. 10-year Treasury yields fell to near two-month lows. The decline in Treasury yields, traditionally a support for the dollar, further catalyzed the increase in silver prices.

Federal Reserve’s Monetary Policy Outlook

The Federal Reserve’s stance on interest rates, which has been a critical factor for precious metal markets, is now under fresh scrutiny. Post-inflation data, the probability of a rate hike in December dropped to zero, according to the CME FedWatch Tool. This change in expectations reflects a growing belief that the Federal Reserve might be nearing the end of its monetary tightening cycle.

Capped Gains and Market Sentiment

Despite favorable conditions, silver’s gains were modest, suggesting that other factors, potentially geopolitical risks, are influencing market sentiment. This cautious response indicates a market that is weighing multiple factors, including the possibility of expanding geopolitical tensions.

Short-Term Outlook

Given the current market dynamics, the short-term outlook for silver appears bullish, primarily driven by the weaker dollar and lower Treasury yields. However, the modest nature of the gains and the potential for geopolitical risks mean that investors should remain vigilant for signs of market fluctuation. Upcoming economic reports, like U.S. retail sales data and the producer price index, are likely to provide further direction for silver’s price trajectory.

Technical Analysis

Daily Silver (XAG/USD)

Silver (XAG/USD) is currently trading slightly above its 200-day moving average of 23.26 and just above the 50-day average of 22.66, suggesting a potential shift towards bullish sentiment.

Its position near the minor resistance level of 23.55 and trend line resistance at 23.97 indicates that silver is testing key resistance zones.

If it surpasses these levels, there could be further upside potential. Conversely, with the main support set at 20.66, any significant drop could see a reversal towards this lower boundary.

The market’s positioning between these averages and near crucial resistance points suggests a cautious but optimistic market outlook, with a close eye on whether these resistance levels will be breached to confirm a stronger bullish trend.

About the Author

James Hyerczykauthor

James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.

Editors’ Picks