Silver Prices Forecast: XAG/USD Surges Amid Reduced Asian Trading Volume

Key Points

• Reduced Asian trading boosts silver’s Monday performance.
• Holding support between $22.23 – $21.88 encourages short-covering.
• Economic data, including CPI, crucial for silver’s short-term direction.

Silver Market Overview: Asian Market Impact

Silver’s price surged on Monday, leveraging reduced trading volume across Asia due to holidays in multiple countries, including China, Japan, and South Korea. This lower activity has provided traders an opportunity to capitalize on market movements.

At 08:13 GMT, XAG/USD is trading $22.89, up $0.28 or +1.23%.

Support Zone and Short-Selling

A critical support zone has been established between $22.23 and $21.88. This development is prompting short-sellers to cover their positions aggressively, reflecting a growing confidence in silver’s stability.

Market Positioning and Outlook

Despite a reduction of almost 60 basis points in market expectations for 2024 since January, silver remains resilient. Current neutral market positioning indicates potential for silver to gain if upcoming data weakens the dollar and increases expectations for U.S. rate cuts.

Key Economic Data and Risks

This week, focus is on the U.S. Consumer Price Index (CPI), retail sales, and Producer Price Index (PPI). The CPI, particularly, could exert substantial influence. A ‘hot’ CPI might push silver prices towards the $22.23 – $21.88 support zone again, with significant downside risks if this support falters.

Federal Reserve’s Stance

Federal Reserve Chairman Jerome Powell emphasized a cautious approach towards rate cuts, seeking more evidence of sustained inflation decline. This stance, along with the low probability of a rate cut in March, could impact silver’s trajectory.

Commitment of Traders Report Analysis

The latest Commitment of Traders report for silver shows non-commercial traders holding a larger long position (55,335 contracts) compared to their short position (38,455 contracts). This configuration, typically indicative of bullish sentiment, is reinforced by commercial traders’ more substantial short position (79,929 contracts). The total open interest stands at 147,333 contracts.

Market Forecast

Considering the established support zone, the Fed’s cautious stance on rate cuts, and the bullish indications from the Commitment of Traders report, silver appears poised for a bullish trend in the short term. However, this outlook is contingent on the upcoming economic data, particularly the U.S. CPI, which could introduce volatility and test the established support levels.

Technical Analysis

With no visible resistance until the 50-day moving average at $23.28 and the 200-day moving average at $23.37, silver (XAG/USD) prices are surging on Monday. The bullish price action is being fueled by a successful test of a key static support level at $22.23.

If the upside momentum then look for the rally to extend into $23.28 to $23.37, where it is likely to be met by selling pressure on its initial test of this area. Overcoming it, however, could launch a robust rally with potential targets $23.55 and $24.50.