Silver Prices Forecast: XAG/USD Sinks as Rate Hike Rumors Rattle Markets

Highlights

• Silver (XAG/USD) nears its lowest price since March 13, weighed down by a stronger U.S. dollar and rate hike chatter.
• Investors face conflicting messages from the Federal Reserve on the trajectory of interest rate hikes.
• Minneapolis Fed’s Neel Kashkari questions if current interest rates are sufficient to tackle inflation.
• Contrarily, New York Fed’s John Williams hints the rate-hiking cycle could be wrapping up.

Rate Jitters Pull Silver Prices Lower

Silver (XAG/USD) is slumping on Monday, testing its lowest price since March 13, amid a stronger U.S. dollar and heightened speculation over interest rates. The descent follows a steep loss in September and the third quarter.

Federal Reserve Confusion

Market participants are grappling with inconsistent cues from the Federal Reserve on the trajectory of interest rate hikes. While Minneapolis Fed President Neel Kashkari remains uncertain over the adequacy of current interest rates in tackling inflation, New York Fed President John Williams hints at an end to the rate-hiking cycle.

Dollar Strength and Treasury Yields

Riding the coattails of potential rate hikes, the dollar has reached a 10-month high, exacerbating silver’s woes. Concurrently, U.S. 10-year Treasury yields have retraced from a 15-year peak, illustrating the market’s divided stance on inflation. CME FedWatch Tool data shows almost equal probabilities for another rate hike this year and for policy easing in H1 2024.

Dim Outlook on Silver Demand

The appetite for silver as a financial cushion against economic turbulence appears fragile, reflecting concerns about the U.S.’ uncertain economic path. The core PCE index—Fed’s preferred inflation barometer—showed a moderation in August, adding to the bearish sentiment around silver.

Short-Term Forecast

Given the existing climate of rate uncertainty and a strong dollar, the immediate outlook for silver is bearish. Traders should tread cautiously due to mixed signals on rate adjustments from Federal Reserve officials.

Technical Analysis

After verifying the moving averages, it’s clear that Silver (XAG/USD) is experiencing bearish conditions. The current daily price of 21.73 sits well below both the 200-day moving average of 23.44 and the 50-day moving average of 23.39, indicating that the commodity is in a downtrend.

This is supported by a 14-Day RSI of 29.36, which is significantly below the 30 threshold, marking it as oversold.

The current price is also beneath both main and minor support levels, 22.36 and 22.84 respectively, suggesting a lack of buyer interest at these key price points.

Trend line support is at 22.33, which has already been broken, potentially accelerating the downside. Minor and main resistance levels stand at 23.35 and 23.77, far removed from the current trading price.

Overall, with multiple technical indicators showing weakness, the market sentiment for Silver leans heavily bearish.