Silver (XAG) Daily Forecast: Dips to $28.08; Ascending Channel to Drive Buying?

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Updated: May 13, 2024, 07:35 GMT+00:00

Key Points:

Silver price dips to $28.08, affected by the Fed's firm stance and a stronger US dollar.
Fed's mixed signals on interest rates create uncertainty, impacting precious metals.
Geopolitical unrest in the Middle East may prevent further drops in silver prices.

Market Overview

Silver price (XAG/USD) began the week on a downward trend, trading around $28.08 and reaching an intraday low of $28.06. This decline in silver prices is linked to hawkish comments from the Federal Reserve (Fed) and increasing speculation that the Fed might postpone its easing plans, which strengthened the US dollar and led to the decrease in silver prices.

Additionally, positive market sentiment also played a role in reducing silver prices. However, current geopolitical tensions in the Middle East may prevent further declines in the silver price.

Federal Reserve’s Stance

In the U.S., the Federal Reserve’s firm stance and discussions about postponing easing measures have strengthened the US dollar, negatively impacting silver prices. San Francisco Fed President Daly stressed the importance of extended restrictive policy to meet inflation targets.

Concurrently, Atlanta Fed President Bostic hinted at possible interest rate cuts this year despite prevailing uncertainties. Dallas Fed President Logan expressed concerns about inflation risks, advocating against premature rate cuts. Minneapolis Fed President Kashkari is maintaining a cautious approach, setting a stringent criterion for any rate hikes aimed at controlling inflation.

Recent data also influenced market sentiment; the University of Michigan Consumer Sentiment Index dropped to 67.4 in May from 77.2 in April, a six-month low, falling short of the expected 76. Concurrently, the UoM five-year Consumer Inflation Expectation rose to 3.1%, the highest in six months, from the earlier 3.0%.

Thus, the Federal Reserve’s firm policy stance and the potential delay in easing have supported the US dollar while exerting downward pressure on silver prices. However, the escalating inflation expectations might offer some support to silver in the short term.

Geopolitical Tensions in the Middle East Boost Silver Prices

Geopolitical developments in the Middle East, especially Israeli military operations in Gaza, are likely to support precious metal prices temporarily. The Israeli military has conducted operations in northern Gaza, with continued activities in eastern Rafah and near the Rafah border, as well as in the Zeitoun neighborhood.

CNN describes these actions as precursors to a larger military campaign. As a result, the ongoing conflicts in the Middle East could push silver prices higher as investors seek precious metals during times of heightened uncertainty and risk.

Silver (XAG/USD) Price Forecast

Silver Price Chart

Silver (XAG/USD) is currently experiencing a mild decline, trading at $28.08, a decrease of 0.48%. The metal’s trading activity indicates a consolidation phase, and it is hovering above the pivotal $28.23 mark.

Technical levels suggest immediate resistance at $28.79, with further ceilings at $29.24 and $29.64 that could cap gains. Support levels are more pronounced below the pivot, with initial support at $27.91, followed by $27.58 and $27.19, where potential dips could stabilize.

The 50-Day and 200-Day Exponential Moving Averages, at $27.38 and $26.81, respectively, underscore a fundamental buying sentiment in the market, affirming the bullish outlook above $28.23. A drop below this critical threshold, however, could trigger a sharp sell-off.

About the Author

Arslan Aliauthor

Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.

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