Silver (XAG) Daily Forecast: Resilient at $27.27; US Dollar Weakness Boosts Prices

Arslan Ali
Published: Apr 29, 2024, 07:28 GMT+00:00

Key Points:

  • Silver (XAG/USD) benefits as the U.S. dollar dips below the critical 106.00 level, enhancing its affordability.
  • Fed's rigid interest rate policy and high inflation rates may delay anticipated cuts, impacting silver prices.
  • Ongoing Israel-Palestine conflict heightens market volatility, increasing safe-haven investments in silver.
Silver (XAG) Daily Forecast: Resilient at $27.27; US Dollar Weakness Boosts Prices

In this article:

Market Overview

The Silver price (XAG/USD) opened the week on a positive note at $27.31, peaking slightly higher at $27.32 during the day. This increase is partly attributed to a weakening US dollar, which makes silver more affordable for investors using other currencies.

Despite the Federal Reserve’s firm stance on not cutting interest rates in the face of high inflation, the US dollar weakened, possibly influenced by a broader market inclination towards riskier assets, diminishing the dollar’s appeal as a safe haven.

Moreover, escalating violence in the Israel-Palestine conflict adds to market uncertainty, heightening demand for silver as a safe haven. Recent reports indicate severe casualties in Gaza, emphasizing the critical need for ceasefire discussions.

Impact of the US Dollar on Silver Prices

Despite the Federal Reserve’s firm stance on maintaining higher interest rates, the US dollar has weakened, falling below the 106.00 level. This depreciation is boosting silver prices. Investors are keenly awaiting the Federal Open Market Committee’s forthcoming decision and subsequent press briefing, where rates are expected to hold steady between 5.25% and 5.5%.

While the US economy demonstrates resilience, escalating inflation fosters doubts that interest rate reductions might be deferred until September or later. In terms of economic indicators, both the headline and Core Personal Consumption Expenditures (PCE) Price Index for March rose by 0.3% month-over-month, aligning with forecasts. Annual headline inflation climbed to 2.7%, exceeding the predicted 2.6% and marking an increase from February’s 2.5%.

Additionally, Core PCE inflation surpassed forecasts, reaching 2.8% year-over-year. These elevated inflation figures may prompt the Federal Reserve to consider earlier interest rate hikes to mitigate inflation, potentially bolstering the US dollar.

Currently, the weakened US dollar coupled with expectations for steady interest rates is bolstering silver prices. However, the possibility of postponed rate cuts alongside a potentially recovering dollar might limit silver’s upward movement.

Escalating Violence in Gaza and Safe-Haven Demand for Silver

On the geopolitical front, the recent attack in Gaza have led to the deaths of at least 27 Palestinians, including many civilians. Hamas officials’ upcoming talks in Egypt indicate a renewed effort for a ceasefire, contrasting with Israel’s approval for continued military action.

However, the toll of casualties on both sides highlights the human cost of the conflict, with over 34,000 Palestinians and over 1,100 Israelis reported dead since October 7. Therefore, the escalating violence in Gaza could increase geopolitical tensions, boosting safe-haven demand for silver as investors seek refuge from uncertainty and conflict.

Silver (XAG/USD) Price Forecast

Silver - Chart
Silver – Chart

Silver is currently trading at $27.27, marking a modest increase of 0.20%. The metal is hovering just above its pivot point of $26.93, suggesting potential for upward movement. Immediate resistance is found at $27.74, with further key levels at $28.74 and $29.51. Conversely, should silver retract, it could test support at $26.33, followed by stronger supports at $25.62 and $24.79.

The 50-day Exponential Moving Average (EMA) is at $27.55, slightly above the current price, indicating a tentative bullish sentiment. However, the 200-day EMA at $26.59 supports the price from a longer-term perspective. The technical setup suggests that while silver remains bullish above $27.00, a drop below this threshold could trigger a shift towards a bearish outlook.

About the Author

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.

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