Silver (XAG) Forecast: Traders Eye $27.22 Support as Fed Meeting Looms

Fed Meeting and US Economic Data Keep Silver Flat

Silver prices remain stagnant as traders await the Federal Reserve’s monetary policy commentary and key U.S. economic data. XAG/USD has been trading above a crucial pivot point of $27.22 for the past four sessions, with market reaction to this level potentially determining the short-term direction.

At 11:29 GMT, XAG/USD is trading $30.76, down $0.46 or -1.48%.

Fed Meeting in Focus

The Federal Reserve is expected to maintain current interest rates at the conclusion of its two-day meeting on Wednesday. However, the central bank may signal potential policy easing as early as September, citing inflation approaching its 2% target. Investors are particularly interested in any hints from Fed Chair Jerome Powell regarding the timing of potential rate cuts during his press conference.

Treasury Yields and Rate Cut Expectations

U.S. Treasury yields showed little movement on Tuesday as investors turned their attention to the Fed meeting and upcoming economic data. According to CME Group’s FedWatch tool, traders are currently pricing in a 100% chance of a rate cut at the Fed’s September meeting.

Labor Market Data Takes Center Stage

A series of employment data releases this week will provide crucial insights into the U.S. labor market:

• Tuesday: JOLTs job openings figures (expected 8.1 million open positions in June)
• Wednesday: ADP’s private payrolls report
• Friday: July jobs report, including nonfarm payrolls and unemployment data

Economists anticipate the payrolls data to show a slowdown in added jobs, which could influence the Fed’s decision-making process.

Market Forecast

The short-term outlook for silver appears cautiously bullish for several reasons:

1. Price Support: XAG/USD has held steady above the key pivot point of $27.22 for four consecutive sessions, indicating strong support at this level.
2. Rate Cut Expectations: Traders are pricing in a 100% chance of a rate cut at the Fed’s September meeting. Lower interest rates typically boost precious metals like silver.
3. Potential Fed Signals: Any hints from the Fed about forthcoming policy easing could drive silver prices higher, as it would likely weaken the dollar and increase silver’s appeal as an alternative investment.
4. Labor Market Slowdown: Anticipated weaker payroll data could reinforce expectations of Fed rate cuts, potentially supporting silver prices.

However, traders should remain vigilant. A more hawkish Fed stance or stronger-than-expected economic data could quickly reverse this outlook, potentially pushing silver below the crucial $27.22 support level.

Silver (XAG/USD) is hovering just above a major pivot at $27.22 for a fourth straight session, suggesting that buyers are coming in to support the market.

Traders should eye the minor top at $28.20 as a potential breakout level. Taking out this level could shift sentiment to the upside and create the momentum needed to test another key pivot at $29.54 over the near-term.

If $27.22 fails as support, prices could drop quickly into the 200-day moving average at $25.92. Value-seekers may find this price attractive.