Silver Price Forecast: PCE Inflation Report Sets the Tone

Highlights

• Comex silver near two-week lows amid strong dollar and bond yields.
• Market awaits Bank of Japan policy adjustments.
• Analysts lower silver forecasts, hope for support from solar panels.

Overview

Comex silver prices are hovering near two-week lows, facing strong headwinds from a surge in the U.S. dollar and bond yields. The recent economic data from the United States has bolstered the greenback and pushed up interest rates, creating a challenging environment for non-interest-bearing metals. As a result, silver is on track for its most substantial weekly decline in five weeks.

Amidst this higher drift in silver prices, there remains a sense of uncertainty as market participants await potential policy tweaks from the Bank of Japan. Speculation is rife that the central bank might consider adjusting its yield curve control policy. Such a move, if confirmed, could lead to increased global bond yields and further weigh on the already struggling precious metal.

Asian stocks have retreated from five-month highs, and the yen is witnessing a sharp rally, driven by expectations that the Bank of Japan will maintain ultra-low interest rates but may make minor adjustments to its yield control policy.

The U.S. dollar index and 10-year Treasury yields are hovering near recent highs following reports of faster-than-expected economic growth in the second quarter. This data has eased concerns about a potential recession, increasing the likelihood of further interest rate hikes by the Federal Reserve.

As interest rates and Treasury bond yields rise in the U.S., the opportunity cost of holding silver also increases, putting additional pressure on the metal’s prices.

Analysts Lower Forecasts for Silver and Gold

Analysts have slightly lowered their silver price forecasts for this year, projecting average prices of $23.52 per ounce in 2023 and $25.00 in 2024, as per a Reuters poll. The lackluster performance of gold and concerns about the economic outlook, particularly in China, have contributed to the downward pressure on silver prices. However, there is a glimmer of hope for silver demand, as analysts believe it could find support from the growing demand for solar panels.

Moreover, the global economic concerns have not only impacted silver but also driven down the price forecasts for platinum and palladium in 2024.

In conclusion, silver prices are facing challenges amid a strong U.S. dollar, rising bond yields, and uncertain global economic conditions. As the market awaits the Bank of Japan’s decision, investors keep a watchful eye on potential policy adjustments that could further impact silver’s performance.

While analysts have lowered their price forecasts, there is optimism that the demand for solar panels could offer some support. However, overall, the short-term outlook for silver remains somewhat bearish given the prevailing economic factors and market dynamics.

Technical Analysis

Comex Silver’s 4-hour chart analysis shows a current price of 24.430, slightly above the previous close at 24.360, indicating mild upward intraday momentum. The market is cautiously bullish as the price resides above the 200-4H (23.834). At the same time, however, the short-term outlook is bleak with prices below the 50-4H (24.907) moving averages. The 14-4H RSI at 40.18 suggests bearish momentum.