Silver (XAG) Daily Forecast: Prices Slide to $27.55; Descending Trendline Signals Sell

By:

Published: Aug 14, 2024, 07:16 GMT+00:00

Key Points:

Silver prices fall to $27.55 as a stronger US dollar pressures the market.
Positive equity sentiment reduces demand for silver, adding to its recent decline.
Gaza conflict boosts safe-haven demand, potentially limiting further losses in silver prices.

Silver (XAG) Daily Forecast: Prices Slide to $27.55; Descending Trendline Signals Sell

Market Overview

Silver prices (XAG/USD) continued their decline for the second consecutive day on Wednesday, trading around $27.75 and reaching an intra-day low of $27.55.

This drop is mainly due to the strengthened US dollar, which gained despite softer U.S. producer inflation data, fueling expectations for more aggressive interest rate cuts.

Positive sentiment in equity markets has further reduced demand for the safe-haven metal. The decline is also driven by market repositioning ahead of the critical US consumer inflation report due later today.

However, silver’s downside is likely limited by ongoing concerns over potential geopolitical escalations in the Middle East.

Silver Prices Could Rise on Fed Rate Cut Hopes Amid Cooling Inflation Data

Expectations are growing that the Federal Reserve will cut interest rates more deeply due to cooling inflation. This is positive for silver, as lower rates often boost the appeal of non-yielding assets like precious metals. Silver stands to benefit as the US dollar weakens and Treasury bond yields drop.

Atlanta Fed President Raphael Bostic indicated he might support a rate cut by year-end if data confirms this trend. All eyes are now on the US Consumer Price Index (CPI) report. If the CPI shows weaker inflation, the likelihood of a 50-basis point rate cut in September could increase, likely driving silver prices higher.

The US Producer Price Index (PPI) rose by 2.2% annually in July, down from 2.7% in June, while core PPI remained flat, signaling cooling inflation. This data suggests that the Federal Reserve may soon begin cutting rates, leading to lower US Treasury bond yields.

However, despite the positive outlook for Fed rate cuts, silver prices are losing traction. This could be due to market optimism, stronger equity performance, or uncertainties surrounding upcoming CPI data, which may limit silver’s gains.

Gaza Conflict Drives Safe-Haven Demand: Impact on Silver Prices Amid Instability

Ongoing violence and humanitarian crises in Gaza are raising global concerns. Despite international condemnation and significant civilian casualties, the conflict continues, with the US approving over $20 billion in new weapons sales to Israel.

This instability may limit silver’s losses, as geopolitical tensions often boost demand for safe-haven assets like silver.

These developments could support silver prices, balancing out the declines driven by expectations of further US interest rate cuts and a stronger dollar.

Short-Term Forecast

Silver (XAG/USD) faces bearish pressure, struggling below $27.96. If it fails to break this level, prices may decline toward $27.21 or lower, with $26.56 as a potential target.

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver – Chart

Silver (XAG/USD) is trading at $27.75, down 0.66% on the day, struggling to break above the pivot point at $27.96. The chart shows a downward trend line acting as a significant resistance around this level.

The recent formation of doji and spinning top candles near the pivot suggests weakening bullish momentum, indicating that sellers may soon take control.

The 50 EMA at $27.72 and the 200 EMA at $28.66 confirm this bearish sentiment. If silver fails to break above $27.96, it could continue its decline towards $27.21 or even $26.56. A break above $27.96 could shift the trend upward.

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.

Editors’ Picks