Silver Prices Forecast: XAG/USD Traders Battle Yields, Dollar, Upcoming Data

Highlights

• Silver spot and futures inch up, signaling the market’s volatile sentiment ahead of key economic indicators.
• Non-farm payrolls and U.S. CPI data loom large as market drivers; CME FedWatch places 24% chance of another rate hike.
• Federal Reserve’s unyielding stance on rate hikes makes silver less attractive compared to yield-generating assets.

Silver Faces Market Headwinds Amid Economic Uncertainty

The silver (XAG/USD0 market is currently locked in a state of hesitancy, teetering between gains and losses as traders await key economic data releases. Silver nudged up 0.97% on Thursday to $21.21 per ounce, suggesting a feeble recovery after a series of declines, in stark contrast to gold’s worst losing streak since 2016.

Navigating Economic Gauntlets

Economic data is the driving force behind the current price action in the silver market. All eyes are on the imminent non-farm payrolls report, a bellwether for the Federal Reserve’s monetary policy. According to current market expectations, as gauged by the CME FedWatch tool, there’s a 24% likelihood of another 25-basis point rate hike this year. Additionally, U.S. CPI data expected next week will serve as another decisive catalyst for silver’s trajectory.

Interest Rate Conundrum

Silver’s tepid performance is tethered to Federal Reserve actions and the dynamics of Treasury yields. With the Fed unwavering in its interest rate hikes since March 2022, the allure of non-yielding assets like silver diminishes. The recent retreat in the U.S. 10-year bond yields and a softer dollar have taken some heat off the metal but haven’t swung the market sentiment firmly in favor of bulls.

Labor Market Impact

Expectations for September’s non-farm payrolls stand at a 170,000 increase, down from 187,000 in August. The preceding ADP report painted a lackluster picture of job growth, primarily in service sectors. Such subdued labor metrics could signal the Federal Reserve to slow its pace of rate hikes, potentially influencing silver prices.

Short-Term Outlook: Tentatively Bearish

In the short term, the silver market retains a bearish undertone, constrained by the ongoing Treasury yield fluctuations and the Federal Reserve’s monetary stance. However, if incoming economic reports underperform market expectations, silver could rally. Simply stated, XAG/USD’s next move is likely to be data-driven.

Technical Analysis

The daily price of Spot Silver (XAG/USD) at 21.14 currently sits well below both the 200-Day and 50-Day moving averages, at 23.40 and 23.17, respectively, indicating a bearish trend in the commodity.

Moreover, this price level is well below the main and minor support levels of 22.36 and 22.84. With the trend line support at 22.36 not far off, the recent breach further accelerated to the downside.

In summary, based on these indicators, the current market sentiment for Spot Silver can be classified as bearish. However, with a support base possibly forming, the market remains vulnerable to a short-covering rally.