Market Overview
Silver prices (XAG/USD) declined on Monday, pressured near $28.97, with an intra-day low of $28.73. This drop is primarily driven by positive market sentiment, reducing demand for the safe-haven metal. However, the decline in silver might be temporary due to expectations of dovish Federal Reserve (Fed) monetary policy.
Ongoing geopolitical risks, including conflicts in the Middle East and the prolonged Russia-Ukraine war, may continue to support silver prices. Traders are likely to remain cautious until there is more clarity on the Fed’s policy direction.
Market attention is now focused on the upcoming release of FOMC meeting minutes on Wednesday and Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, which may provide further insights.
Silver Hits $29.12 High as Dovish Fed Weakens Dollar, Tensions Rise
The dollar weakened as expectations for a dovish Federal Reserve rate cut grew. Recent data, including the Producer Price Index (PPI) and Consumer Price Index (CPI), pointed to a decline in inflation, reinforcing predictions for a 25-basis-point rate cut in September.
Despite positive U.S. Retail Sales easing recession fears, the inflation reports fueled speculation about Fed policy easing, which weakened the dollar and pushed silver prices to a record high of $29.122. The University of Michigan’s Consumer Sentiment Index rose to 67.8 in August, with inflation expectations steady.
Comments from Federal Reserve officials further contributed to the dollar’s decline. Chicago Fed President Austan Goolsbee suggested the economy isn’t overheating, advocating caution in maintaining restrictive policies.
San Francisco Fed President Mary Daly emphasized a gradual approach to lowering borrowing costs, aligning with market expectations of imminent policy easing.
Initially, this drove silver prices above $29.122, but a shift in risk-on sentiment is now leading investors away from safe-haven assets like silver.
Silver Price Forecast
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See all Silver forecastsMiddle East, Ukraine Tensions Drive Silver Prices Higher
Ongoing conflicts in the Middle East and the Russia-Ukraine war continue to support silver prices. Recently, Hamas rejected terms for a hostage release-ceasefire deal in Doha, escalating tensions further.
Meanwhile, Russia vowed retaliation after Ukraine’s cross-border attack on Kursk, marking a rare instance of foreign military action on Russian soil since World War II.
In Gaza, Israeli forces are advancing in central Deir el-Balah, pushing Palestinians into just 11% of the Gaza Strip. A Palestinian journalist was injured by Israeli forces during the ground invasion in Khan Younis.
U.S. Secretary of State Antony Blinken plans to meet with Israeli Prime Minister Benjamin Netanyahu amid disagreements over the Philadelphi Corridor, the border between Gaza and Egypt.
The conflict has resulted in over 40,000 deaths and 92,000 injuries in Gaza, while Hamas attacks on October 7 killed about 1,139 people in Israel and left over 200 captive.
The ongoing conflict in Gaza and rising tensions in the region are driving increased demand for safe-haven assets like silver. As geopolitical uncertainties escalate, investors often turn to precious metals, further boosting silver prices.
Short-Term Forecast
Silver (XAG/USD) may experience volatility near $29.00, with resistance at $29.03. Breaking this level could trigger a bullish move, but risks remain if prices fall below support at $28.43.
Silver (XAG/USD) Price Forecast: Technical Outlook
Silver (XAG/USD) is currently trading at $28.97, just below the pivot point at $29.09. The metal is facing significant resistance around $29.03, where a triple top pattern has formed.
This resistance level is crucial; if silver manages to break above it, we could see a bullish breakout that drives the price toward higher levels, with immediate resistance at $29.64, followed by $30.07 and $30.60.
On the downside, immediate support is at $28.43, with additional support at $27.98 and $27.29. The 50-day EMA at $28.02 and the 200-day EMA at $28.60 are key levels to watch for potential trend changes.
The outlook remains bearish below $29.09, but a break above this level could boost bullish momentum, leading to further gains.
