Market Overview
Silver price (XAG/USD) failed to stop its bearish rally and remained under pressure around the $31.30 level, hitting an intraday low of $31.15. However, the reason for its downward trend can be attributed to a stronger US dollar and higher US yields, which gained traction on the back of diminishing expectations of the Federal Reserve’s (Fed) rate cut in September.
Moreover, the previously released upbeat US economic data also boosted the US dollar and contributed to the decline in the Silver price. In contrast to this, the risk-off market sentiment, driven by the long-lasting Middle East geopolitical risks, was seen as one of the key factors that could help the Silver price to limit its losses.
Looking forward, investors will monitor the second estimate of the US Gross Domestic Product (GDP) for Q1 2024 on Thursday. Meanwhile, ongoing geopolitical tensions in the Middle East might boost traditional safe-haven assets like silver.
US Economic Conditions and Silver Price Outlook
On the US front, the US economy is showing slow growth and mixed conditions in different industries, according to the latest Fed report. Employment is slightly up, wages are growing moderately, and prices are rising modestly. Some officials are unsure about inflation, with one suggesting a rate cut could help if inflation slows.
The chance of a rate cut in September is now 41.7%, down from last week. Another official mentioned the possibility of rate hikes. Housing prices in March went up by only 0.1%, a drop from February’s 1.2% increase.
Hence, the mixed economic conditions and uncertainty about inflation could weaken the US dollar. The chance of a rate cut may also pressure the dollar, while the possibility of rate hikes could strengthen it. Silver prices may benefit from economic uncertainty and a weaker dollar.
Geopolitical Situation and Silver Market Dynamics
On the geopolitical front, the Israeli military has gained control over the Philadelphi Corridor along the Gaza-Egypt border, intensifying its ground invasion despite international criticism.
However, the long-lasting, intense fighting and airstrikes persist in Rafah, resulting in civilian casualties. Israel’s national security adviser predicts a potential seven-month conflict to weaken Hamas.
While geopolitical tensions might typically boost safe-haven assets like silver, silver prices are currently declining despite the situation, indicating other market factors are influencing its movement.
Short-Term Forecast
Silver (XAG/USD) continues its bearish trend, remaining pressured around $31.3185 and hitting an intraday low of $31.1595. A stronger US Dollar and higher yields, driven by reduced expectations of a Fed rate cut, contribute to this decline.
Silver (XAG/USD) Price Forecast: Technical Outlook
Silver (XAG/USD) is trading at $31.30, down 0.88%. The pivot point at $31.49 is critical for determining the next market direction. Immediate resistance levels are at $32.33, $32.96, and $33.60, while immediate support is found at $30.71, $30.06, and $29.37.
Technical indicators show the 50-day Exponential Moving Average (EMA) at $31.10 and the 200-day EMA at $29.02. A bearish engulfing pattern on the 4-hour chart supports the likelihood of a downtrend.
The outlook remains bearish below $31.50, suggesting that a break above this level could boost bullish momentum.
