Silver Prices Forecast: XAG/USD Surges on Fed Rate Cut Hopes

James Hyerczyk
Updated: Jun 20, 2024, 15:50 GMT+00:00

Key Points:

  • Silver prices hit a two-week high as Fed rate cut expectations rise.
  • Upcoming economic data will be crucial for confirming silver's bullish trend.
  • Geopolitical tensions, such as the Gaza crisis, are boosting silver's appeal.
Silver Prices Forecast

In this article:

Silver Bullish Outlook

Silver prices climbed to a two-week high on Thursday, buoyed by expectations of interest rate cuts from the Federal Reserve later this year. A dovish shift in the Fed’s monetary policy stance is seen as positive for silver, as lower rates reduce the opportunity cost of holding non-yielding bullion.

At 10:42 GMT, XAG/USD is trading $30.29, up $0.53 or +1.77%.

Economic Data Confirmation Needed

Analysts believe silver’s next leg higher hinges on confirmation of a softening U.S. economic picture. Recent data on labor and retail sales hinted at a potential slowdown, and traders are awaiting this week’s jobless claims and purchasing managers’ indexes for further clues. This data will be crucial in solidifying expectations for Fed rate cuts, which is the key driver for silver prices in the near term.

Geopolitical Jitters Add Support

The ongoing conflict in the Middle East is also providing some support for silver prices. Investors often seek safe-haven assets during times of geopolitical uncertainty. The recent escalation in the Gaza crisis is adding a layer of nervousness to the market, potentially benefiting silver.

Central Bank Activity: A Mixed Bag

While the Fed’s policy stance is the key driver for silver, investors are also monitoring central bank actions elsewhere. The Bank of England (BOE) kept rates unchanged on Thursday, despite headline inflation reaching its target for the first time in three years. However, core inflation remains elevated, and some analysts expect a rate cut from the BOE in August. This wait-and-see approach from the BOE could limit any significant impact on silver prices in the short term.

On the other hand, the Swiss National Bank (SNB) cut rates for the second time this year, highlighting the ongoing global trend towards monetary easing. This reinforces the dovish sentiment that is generally positive for silver.

Short-Term Forecast: Bullish

The outlook for silver remains bullish in the short term. The prospect of multiple Fed rate cuts this year, coupled with potential economic weakness and geopolitical tensions, is likely to provide continued support for silver prices. Confirmation of a slowing U.S. economy through upcoming data releases is key to unlocking silver’s next upside move.

Daily Silver (XAG/USD)

XAG/USD prices jumped on Thursday after sellers finally threw in the towel after failing to break through the 50-day moving average at $29.10. This indicator is major support as witnessed by the market’s recent nine days of consolidation just above this moving average.

Given the short-term range of $32.52 to $28.66, the most likely upside target is its pivot at $30.59. Until buyers can sustain a move over this level, there will always be the possibility of a rally in a bear market.

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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