Silver Price Forecast: XAG/USD rises to near $29.30 with Fed Powell’s speech under spotlight
- Silver price gains to near $29.30 in the countdown to Fed Powell’s speech.
- Jerome Powell is expected to provide fresh cues on interest rates and the economic outlook.
- US bond yields remain under pressure on firm Fed rate cut prospects.
Silver price (XAG/USD) rises to near $29.30 in Friday’s North American session, with investors focusing on the Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole (JH) Symposium. The white metal gains as bond yields decline on expectations that Jerome Powell will deliver a dovish guidance on interest rates.
10-year US Treasury yields fall to near 3.84%. Lower yields on interest-bearing assets bode poorly for non-yielding assets, such as Silver, given that they reduce the opportunity cost of holding an investment in them.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, recovers its intraday losses and rebounds to near 101.50.
Market participants are optimistic about Powell’s dovish guidance but they want more clarity on the likely size of interest rate cuts in September. According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that the probability of 50 basis points (bps) interest-rate cut in September is 28.5%. While rest is favoring a 25-bps interest rate reduction.
Investors will also focus on Powell’s speech to know about whether chances of ‘soft landing’ are intact. Market experts started anticipating a potential United States (US) recession after the Nonfarm Payrolls (NFP) report for July indicated a sharp slowdown in the labor demand and an increase in the Unemployment Rate to 4.3%, the highest level seen since November 2021.
Silver technical analysis
Silver price turns sideways after a decisive break above August 2 high of $29.20, which faltered the lower high lower low formation on a four-hour timeframe. The 200-period Exponential Moving Average (EMA) near $28.77 acts as cushion for Silver price bulls.
The 14-period Relative Strength Index (RSI) falls to near 60.00, suggesting that the bullish momentum has concluded for now. However, the bullish bias remains intact.
Silver four-hour chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.