Silver Prices Forecast: Facing Pressure Ahead of Key US Jobs Report

Heavy Selling Pressure as U.S. Jobs Data Looms

Silver prices are plunging shortly before the release of the U.S. Non-Farm Payrolls report at 12:30 GMT. Benchmark 10-year Treasury yields are ticking higher and the dollar is nearly flat so we have to chalk up the move to profit-taking and position-squaring ahead of the report. Despite the setback, silver prices were set for their second straight weekly gain as traders stepped up bets that the Federal Reserve will start cutting rates soon, sending the dollar and Treasury yields lower.

At 10:17 GMT, XAG/USD is trading $30.45, down $0.87 or -2.79%.

Dovish Fed Hopes Buoy Silver

The primary driver for silver’s recent bullish momentum is the growing anticipation of a dovish shift from the Federal Reserve. Investors are keenly eyeing Friday’s data, hoping for signs of a slowing labor market and economy. This could prompt the Fed to cut interest rates sooner, potentially in September. The recent rate cut by the European Central Bank (ECB) further fuels this belief.

Strong Dollar Threatens Silver’s Rally

However, a significant hurdle awaits silver in the form of the NFP report. A stronger-than-expected report could lead to a surge in the U.S. dollar, potentially weighing on silver prices. Economists are forecasting an increase of 190,000 new jobs in May, exceeding the figures from April. This could dampen investor enthusiasm for silver if it strengthens the dollar.

Upside Potential: Weak Jobs Data Lifts Silver

Conversely, a weaker NFP report could signal a softening economy, potentially providing a tailwind for silver prices. This aligns with the recent downtrend in Treasury yields, making non-yielding assets like silver more attractive to investors seeking alternative investments. A weak jobs report could trigger a buying spree and propel silver prices higher.

Market Forecast: Volatility Until the Data Arrives

The NFP report presents a near-term test for silver’s recent bullish momentum. A strong report could trigger a sell-off, potentially erasing the weekly gains. Conversely, weak data could lead to a price surge, extending the silver rally. Expect increased volatility in the silver market until the data is released and investors can assess its implications for the Fed’s monetary policy stance.

Technical Analysis

XAG/USD prices are trading lower on Friday after crossing to the weakside of the daily pivot at $30.95. This price is now resistance as well as a potential triggerpoint for an upside breakout.

Continued pressure under $30.95 could put the recent short-term bottom at $29.38 on the radar. If this price fails as support then look for the selling to possibly extend into the 50-day moving average at $28.35.