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Silver (XAG) Forecast: Pivotal $28.22 Level Holds Key to Bullish Rally or Bearish Drop

By:
James Hyerczyk
Published: Sep 10, 2024, 11:34 GMT+00:00

Key Points:

  • Silver prices hover at $28.22 pivot; CPI data and Fed meeting to determine short-term market direction.
  • Lower-than-expected inflation could boost silver prices, weakening dollar and increasing investor appeal.
  • Traders split on Fed rate cut size: 50bps cut favors silver, while 25bps may limit gains.
  • Silver's key resistance at $30.19; breakout could push prices to $30-$32 range by year-end.
Silver Prices Forecast:

In this article:

Market Overview

Silver prices remained flat in early Tuesday trading, consolidating around $28.22. This subdued activity reflects traders’ caution ahead of critical economic data that could significantly impact silver’s near-term direction.

At 11:27 GMT, XAG/USD is trading $28.40, up $0.05 or +0.19%.

Key Factors Influencing Silver Prices

U.S. Inflation Data

Wednesday’s U.S. Consumer Price Index (CPI) report is crucial for silver prices. A lower-than-expected CPI could boost silver by potentially leading to more aggressive Fed rate cuts, weakening the dollar and enhancing silver’s appeal.

Federal Reserve Rate Cut Expectations

Market sentiment is split on the size of the anticipated Fed rate cut next week. A larger 50 basis point cut would likely drive silver prices higher by reducing the opportunity cost of holding non-yielding assets. A smaller 25 basis point cut might temper gains.

Treasury Yields and Economic Indicators

Recent weak U.S. economic data has put downward pressure on Treasury yields, typically supporting higher silver prices. If this trend continues, it could provide a bullish backdrop for silver.

Currency Markets

The dollar index stands at 101.69. Any dollar weakening could boost silver prices by making it more affordable for holders of other currencies.

Seasonal Demand

Analysts predict increased physical silver demand due to upcoming festivities in India and China, potentially providing a price floor.

Market Forecast

Daily Silver (XAG/USD)

Silver’s short-term outlook hinges on its performance around the critical $28.22 pivot. This level is crucial for daily trading patterns:

Upside Scenario

If silver maintains prices above $28.22, it could build momentum towards $30.19. A breakout above this resistance could open the path to the $30 – $32 range by year-end, supported by potential Fed rate cuts and seasonal demand.

Downside Risk

If silver fails to hold above $28.22, it may test support at $26.47. A breach below could push prices towards the 200-day moving average at $26.69, a critical long-term support level.

The upcoming U.S. CPI data and Fed meeting are likely catalysts for a decisive move around the $28.22 pivot. Lower-than-expected inflation or a dovish Fed stance could propel silver above the pivot, while higher inflation or a less accommodative Fed could drive prices below it.

Traders should monitor daily closes and volume patterns relative to $28.22 for trend direction. Given current economic uncertainties, silver prices are likely to remain volatile in the near term.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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