Silver Prices Forecast: XAG/USD Surges as Dovish Fed, Geopolitical Risks Converge

Highlights

• Silver rides geopolitical turmoil and dovish Fed hints for a rally, eyeing future gains.
• Safe-haven demand for Silver (XAG/USD) renews amid Israel-Hamas tension and Fed speak.
• Vice Chair Philip Jefferson among Fed voices pointing to a slow down in rate hikes.

Silver Eyes Rally as Geopolitical Risks and Dovish Fed Align

Silver (XAG/USD) is capitalizing on a perfect storm of factors, setting the stage for a potentially significant rally. After spiking 1.2% earlier in the week, largely in response to geopolitical tensions between Israel and Hamas, silver remains a key asset for traders looking for a hedge against uncertainty.

Safe-Haven Asset in Focus

The volatile geopolitical climate, coupled with the uncertainty surrounding U.S. inflation data and upcoming corporate earnings, has thrust silver back into the spotlight as a go-to safe-haven asset. Meanwhile, dovish whispers from the Fed have put downward pressure on both the dollar and Treasury yields, enhancing silver’s attractiveness to traders.

Fed’s Rate Hike Pause

Comments from Federal Reserve officials, notably Vice Chair Philip Jefferson and Dallas Fed President Lorie Logan, hint at a pause in rate hikes, reducing the odds of imminent tightening. This has been confirmed by the FedWatch tool, which showed probabilities of a rate hike dropping from 27% to 14%.

Treading Carefully on Rate Policy

While combating high inflation remains a priority, Fed officials are signaling a cautious approach to any further rate hikes. The emphasis now seems to be on avoiding the risks associated with abrupt changes in monetary policy, a sentiment that’s bolstering silver’s bullish outlook.

Short-term Forecast: Silver Bulls in Control

Given the confluence of geopolitical unrest and the Fed’s tempered stance on rate hikes, silver appears primed for further gains. Traders should closely watch the incoming Fed minutes and U.S. inflation data for additional market direction while keeping tabs on Middle East developments.

Silver (XAG/USD) Technical Analysis

Silver is trading at $21.74, below both the 200-Day and 50-Day moving averages, which stand at $23.36 and $23.00 respectively, indicating a prevailing bearish sentiment.

The commodity also hovers below its trend line support at $22.23, usually a bearish cue.  However, overcoming trend line support could trigger a bullish reversal, but as of now, the bias remains bearish.

Keep an eye out for how the commodity interacts with the former trend line support since this will likely set the tone.