Silver Prices Forecast: Middle East Tension Supports, Fed Uncertainty Limits

Key Points

• Geopolitical Tensions Boost Silver Demand.
• Fed’s Stance Key Factor in Short-Term Silver Price.
• Uncertainties Fuel Bullish Outlook for Silver.

Steady Gains Amid Middle East Turmoil

Silver prices are higher on Monday, buoyed by escalating Middle East tensions and the looming decisions of the U.S. Federal Reserve, shaping a potentially volatile short-term outlook for the precious metal.

At 08:34 GMT, XAG/USD is trading $23.02, up $0.22 or +0.95%.

Geopolitical Tensions Elevate Silver Demand

Ongoing instability in the Middle East has intensified interest in silver as a safe-haven asset. A recent unmanned drone attack near the Syrian border, resulting in the loss of three U.S. service members, fueled geopolitical concerns. Geopolitical risks were further compounded by a court order to liquidate China Evergrande Group, supporting silver prices.

Fed Expectations

The Fed’s actions will be pivotal. A dovish stance, maintaining accommodative policies, may weaken the U.S. Dollar, supporting silver. Conversely, a hawkish approach with aggressive rate hikes could strengthen the Dollar and cap silver gains. Monitoring the Fed’s statements and Chair Jerome Powell’s remarks is crucial.

Short-Term Market Forecast

Considering these factors, the short-term outlook leans bullish for silver. However, the Fed’s stance will be a key determinant of the extent of price gains. Investors should stay vigilant, as any shifts in the Fed’s tone could trigger rapid market responses.

In summary, silver prices find support in geopolitical tensions and uncertainties, with the Fed’s upcoming decisions adding an extra layer of complexity. A bullish short-term outlook prevails, but it hinges on the Fed’s monetary policy stance, demanding vigilant monitoring by investors.

Technical Analysis

In a counter-trend move, silver (XAG/USD) prices are edging higher on Monday after finding solid support at $22.00 – $21.88 last week. The recent price action suggests this area is key to the market’s longer-term stability.

The daily chart indicates there is plenty of room to the upside with the next target a cluster of levels including the 200-day moving average at $23.50, resistance at $23.55 and the 50-day moving average at $23.59.

This cluster area is essentially a “Wall of Resistance”. Therefore, we expect sellers to defend it, especially since the main trend is down. However, it could weaken if the buying is strong enough. This makes the upper resistance or 50-day moving average at $23.59 a potential trigger point for an acceleration to the upside.