Silver Prices Forecast: Sentiment Turns Bearish Following Fed Minutes

Key Points

• Silver’s modest rise overshadowed by bearish market trend
• Fed’s ambiguity fuels uncertainty in silver markets
• Economic data dampens silver trading sentiment

Thursday’s Early Market Trends

As Thursday’s trading unfolds, Silver (XAG/USD) experiences a modest uptick, influenced by dips in bond yields and a subdued U.S. Dollar. Despite support from geopolitical tensions in the Middle East, the broader market sentiment remains bearish, as investors anticipate further job data that could shape the Federal Reserve’s monetary policy. This cautious outlook reflects weaker demand for silver, particularly when compared to gold.

Federal Reserve Minutes and Market Reaction

Following the release of the Federal Reserve’s December meeting minutes on Wednesday, traders have shown a cautious reaction. The minutes indicated a strategic approach to inflation and a concern over the potential harm of restrictive monetary policy. Yet, the lack of clarity on future rate cuts has cast a shadow over silver’s market prospects.

Impact of Treasury Yield Fluctuations

Silver, on Thursday is also reacting to Wednesday’s Treasury yield movements. After a brief spike above 4%, the 10-year Treasury yield settled down to 3.911. This volatility and the overall downward trend from last year’s highs have prompted traders to reassess their expectations for the Federal Reserve’s rate cut strategy, influencing silver’s price trajectory.

US Dollar’s Influence

The U.S. Dollar’s near-flat performance, observed on Thursday, is contributing to silver’s current market stance. Investors are recalibrating their rate cut forecasts based on the Federal Reserve’s latest policy insights, balancing global growth concerns and market uncertainty.

Economic Reports Weigh on Silver

Economic data released on Wednesday, including the JOLTS jobs report and the ISM Manufacturing index, pointed to a contracting U.S. manufacturing sector and easing labor market conditions.

These reports, along with upcoming jobless claims and non-farm payroll figures, are crucial for evaluating the Federal Reserve’s potential rate adjustments. With this backdrop, silver’s demand remains under pressure, supporting a bearish outlook in the short term.

Technical Analysis

The current market sentiment for Silver (XAG/USD) is leaning towards bearish. The current daily price at 23.00 is below both the 200-day and 50-day moving averages, set at 23.66 and 23.62 respectively. This positioning under the moving averages suggests a downward trend.

Additionally, the price is hovering close to the minor resistance level at 23.55, indicating potential challenges in upward movement. However, the price is above the minor support level of 22.23, which could offer some stability.

The proximity to the main resistance at 24.50 remains a significant barrier to any potential upward trend, reinforcing the overall bearish outlook.