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Silver Prices Forecast: XAG/USD Soars as Fed Hints at Future Rate Cuts

By:
James Hyerczyk
Published: Dec 14, 2023, 08:05 UTC

Silver jumps on Fed's dovish shift, hinting at March rate cuts, boosting XAG/USD in a lower rate environment.

Silver Prices Forecast

In this article:

Highlights

  • Silver surges on Fed’s rate cut hints.
  • Dollar weakens, treasury yields hit 4-month low.
  • Precious metals rally amid dovish Fed outlook.

Silver’s Rally on Fed’s Dovish Signals

Silver (XAG/USD) experienced a significant surge, reaching a one-week high on Thursday following the Federal Reserve’s unexpected dovish remarks. The suggestion of rate cuts in 2024 led to a decline in the dollar, subsequently boosting investor interest in precious metals.

Federal Reserve’s Unexpected Move

Contrary to market expectations of steady rates, the Fed introduced a new narrative with its projection of three rate cuts in the next year. Fed Chair Jerome Powell’s shift from a previously hawkish stance to a more dovish outlook has significantly impacted market expectations, with a substantial probability of a rate cut by March now being priced in.

Impact on Treasury Yields and Dollar

The yield on the 10-year Treasury note plunged to its lowest level since August, influenced by the Fed’s forward-looking stance. This, in turn, led to a weakening of the dollar, enhanced by the anticipation of policy decisions from the European Central Bank and the Bank of Japan.

Precious Metals Gain Momentum

In the wake of these developments, silver shone brightly, benefitting from the reduced attractiveness of interest-bearing investments in a prospective lower-rate environment. The increase in investments in gold ETFs like GLD further underscores the growing appeal of precious metals.

Outlook and Market Watch

As the market moves past the Fed’s recent decision, focus shifts to upcoming decisions by the ECB and the BoE, as well as upcoming U.S. economic data. These factors are likely to influence the market further and could potentially sustain the rally in precious metals.

The Fed’s dovish stance has invigorated the silver market, and upcoming central bank decisions and economic data will be critical in determining the trajectory of this rally.

Technical Analysis

Daily Silver (XAG/USD)

Silver (XAG/USD), with its current price at 23.87, shows a strong bullish trend. It is trading above both the 200-day and 50-day moving averages, set at 23.55 and 23.25 respectively, indicating a positive momentum over the medium term.

This price is not only above its minor support level at 23.55 but also surpasses the trend line resistance at 23.66. The successful breach of this resistance level points to a potential for continued upward movement.

The proximity of the price to the minor resistance level at 24.50 suggests the market is testing higher levels. Considering these factors, the market sentiment for Silver is bullish, with an inclination towards further upside, given its position relative to key technical indicators.

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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