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Silver Prices Forecast: XAG/USD Turns Lower after Testing Seven-Month Peak

By:
James Hyerczyk

Silver's initial rise to a seven-month high was spurred by gold's rally and rate cut expectations, but the move failed as traders booked profits.

Silver Prices Forecast

In this article:

Highlights

  • Silver reaches seven-month high, influenced by gold’s surge.
  • Fed comments impact silver and gold markets.
  • Potential pullback in silver prices amid economic speculation.

Silver’s Surge Amid Market Speculation and Economic Indicators

Silver (XAG/USD) initially rose to a seven-month high on Monday, influenced by a concurrent surge in gold prices, but those gains have been erased by profit-taking. Gold’s significant rise to a record high was driven by growing expectations of U.S. interest rate cuts next year, despite the Federal Reserve’s efforts to manage such optimism.

Influence of Federal Reserve and Market Reaction

The rally in both silver and gold, starting in early October, gained momentum on Friday following comments from Federal Reserve Chair Jerome Powell about the restrictive nature of current monetary policy. This resulted in a drop in the dollar and Treasury yields, which typically benefits non-interest-bearing assets like silver. However, Powell’s caution against early speculation of rate cuts has led to a more tempered market response.

Market Outlook and Potential Risks

While swaps markets indicate a likelihood of interest rate reductions, the upcoming U.S. labor data poses potential risks. The market is watching closely for signs that could either support a ‘soft-landing’ scenario or suggest stronger economic performance, potentially altering the course of Federal Reserve policy decisions.

Silver’s Price Movement and Future Prospects

Silver’s sharp rise to $25.47 early Monday, following Friday’s gains, has led to suggestions that it might be overbought. The market’s reaction, coupled with uncertainties surrounding Federal Reserve policy, indicates the potential for a short-term pullback in silver prices. The immediate outlook remains cautiously optimistic but is heavily influenced by upcoming economic indicators and market speculation.

Technical Analysis

Daily Silver (XAG/USD)

Silver (XAG/USD), currently priced at $25.16, is trading above both its 200-day and 50-day moving averages, set at $23.44 and $23.74 respectively. This positioning above the key moving averages suggests bullish sentiment in the market.

The current price also stands above the main support level of $23.55 and the minor support level of $24.59, further reinforcing the bullish trend. However, as the price is relatively close to the minor support, it could act as a pivotal point in the short term. A sustained position above this level may continue the upward trend, while a drop below could lead to a test of the main support.

Overall, the market sentiment for silver appears to be bullish, driven by its positive stance relative to the moving averages and support levels. However, Monday’s reversal down has put the market in a weak position, suggesting an imminent correction.

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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