Silver Prices Forecast: XAG/USD Spot Strengthens Despite Hawkish Fed Sentiments

Highlights

• Silver prices gain momentum, approaching key resistance.
• The U.S. dollar’s decline and Treasury yield dip boost silver’s outlook.
• Jerome Powell’s speech at Jackson Hole to provide rate and inflation clarity.

XAG/USD Buoyed by Yield Dip

Silver prices, buoyed by a declining U.S. dollar index and a halt in the U.S. Treasury yield’s rally, are extending their gains, rapidly approaching near a key resistance level at $23.85. This rise contrasts with the precious metal’s gold counterpart, hinting at divergent market sentiments.

Yield Dynamics & Interest Rates

Treasury yields have provided some respite to investors after surging to their highest since November 2007. Despite this, the robust U.S. economy coupled with lasting inflationary pressures might compel the Federal Reserve to uphold higher interest rates longer than anticipated. Fed Chairman Jerome Powell’s upcoming speech at the Jackson Hole Symposium is the next focal point for insights into the bank’s rate trajectory and its stance on the 2% inflation benchmark.

The Hawkish Fed Perspective

Richmond Fed president, Thomas Barkin, remains steadfast in the need for the Fed to uphold the 2% inflation target, emphasizing its credibility. Barkin’s stance reaffirms that the bank’s commitment to this target is unwavering. Furthermore, the U.S. economy’s potential resurgence, underpinned by robust indicators, suggests the Federal Reserve might sustain elevated rates for a more extended period.

Market Watch & Precious Metals

Silver’s uptick this week contrasts with gold’s lukewarm performance. The latter’s demand seems to be ebbing, as evidenced by the recent decline in holdings by the renowned SPDR Gold Trust ETF. However, the allure for silver, represented as XAU/USD, remains undiminished, leading the rally among precious metals.

Short-Term Forecast:  Modestly Bullish

Despite the oscillating market dynamics influenced by interest rates and inflation targets, silver’s market sentiment is cautiously optimistic. Current indicators suggest a modestly bullish trajectory for the metal in the near term.

Technical Analysis

The current 4-hour price of Silver (XAG/USD) stands at 23.68, a slight increase from its previous close at 23.59. This suggests a mild upward momentum. Regarding the moving averages, the commodity’s price is hovering just below the 200-4H moving average of 23.75, indicating resistance at this level. However, it has surpassed the 50-4H moving average of 22.83, signaling bullish momentum. The 14-4H RSI is at 76.60, which denotes an overbought market condition. This could hint at a potential pullback.

Finally, while the price is nearing the main resistance area between 23.60 to 23.85, it’s comfortably above the main support area of 22.70 to 22.28. Taking all these factors into account, the current market sentiment for Silver is cautiously bullish, but with the RSI indicating overbought conditions, some retracement might be on the horizon.

Nonetheless, traders should be prepared for a potential breakout above the 200-4H moving average of 23.75.