Silver Prices Forecast: Gains Capped by Technical Pivot Ahead of PMI Report

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Updated: Jun 21, 2024, 16:11 GMT+00:00

Key Points:

Silver prices are poised for a second consecutive weekly gain, bolstered by dovish Fed hopes and economic data.
Weaker U.S. housing and retail sales numbers suggest a possible rate cut, boosting silver by lowering opportunity costs.
Investors watching manufacturing data and the U.S. dollar's strength, crucial factors for silver’s near-term direction.

Silver Eyes Weekly Gain on Rate Cut Hopes, Key Data Ahead

Silver prices are poised for a second consecutive weekly gain, edging lower on Friday despite some positive data points. The rally is fueled by hopes for a dovish Federal Reserve and a potentially slowing U.S. economy.

At 12:01 GMT, XAG/USD is trading at $30.54, down $0.21 or -0.67%.

U.S. Economic Data Hints at Slowdown

Recent U.S. economic data, including weaker housing numbers and tepid retail sales, reinforces the possibility of a rate cut in September. This is bullish for silver, as lower interest rates decrease the opportunity cost of holding non-yielding bullion. Treasury yields also dipped slightly, reflecting investor sentiment towards a potential economic slowdown. However, a significant drop in yields could indicate a weakening economy, potentially leading to decreased industrial demand for silver, a factor to watch for moving forward.

Technical Resistance at $30.59

While silver is up over 3% this week, the key technical hurdle remains at $30.59. How traders react to this level will determine the near-term price direction.

Focus on Manufacturing Data and US Dollar

Market participants are now looking ahead to upcoming data releases, including the Purchasing Managers’ Index (PMI) for manufacturing and services sectors. Existing home sales data for May is also on tap. Additionally, the U.S. dollar’s strength against major peers, particularly the euro, could impact silver prices. A strong dollar can put downward pressure on silver prices as it becomes a more attractive investment compared to other currencies. This is a potential headwind for silver in the near term.

Short-Term Forecast

Overall, the combination of potential rate cuts and sustained industrial demand creates a strong bullish case for silver prices. While short-term fluctuations are likely due to the strong dollar, the long-term outlook for silver remains positive. Investors seeking to capitalize on this potential rise should closely monitor the factors influencing silver’s price, particularly upcoming economic data and the U.S. dollar’s strength.

Technical Analysis

Daily Silver (XAG/USD)

XAG/USD is trading lower on Friday after giving back earlier gains. The short-term range is $32.52 to $28.66. Stopping today’s rally was its 50% level or pivot at $30.59.

Trader reaction to $30.59 is likely to determine the short-term direction of the market.

A sustained move over $30.59 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into $31.55, followed by $32.52.

A sustained move under $30.59 will signal the presence of sellers. This could lead to a retest of the major support at $29.17, the 50-day moving average.

About the Author

James Hyerczykauthor

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.