Silver Prices Forecast: Vulnerable to Downside with 50-MA Setting Tone

Silver Edges Higher as Markets Await Critical Economic Data

Silver prices inched up on Thursday as traders anticipate a series of key U.S. economic reports. The precious metal found support from light short-covering and bargain hunting following Wednesday’s sell-off, with additional lift provided by a softening U.S. Dollar against major currencies. However, silver continues to trade below its 50-day moving average, indicating potential selling pressure beneath the surface.

At 11:08 GMT, XAG/USD is trading $28.89, up $0.12 or +0.42%.

Key Economic Indicators

Investors are closely watching several economic indicators set for release on Thursday, including Final GDP, weekly jobless claims, durable goods orders, and pending home sales. Weekly jobless claims are expected to rise slightly to 240,000, while durable goods orders are anticipated to fall 0.6% in May. Pending home sales are projected to increase by 1% in May. These reports could offer crucial insights into the Federal Reserve’s next moves on interest rates.

Treasury Yields and Fed Outlook

U.S. Treasury yields climbed as market participants seek clues about the economic outlook and monetary policy direction. Recent comments from Fed officials have added complexity to the interest rate outlook. Fed Governor Michelle Bowman stated her baseline view that inflation will decline further with the policy rate held steady. However, she kept the door open for potential rate hikes if inflation progress stalls, underscoring the data-dependent nature of future Fed decisions.

Upcoming Market Movers

Traders should closely monitor Friday’s Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, for further directional cues. This report could be pivotal in shaping market expectations for the Fed’s next moves and, consequently, silver’s price action. As uncertainty over the path of interest rates persists, each economic data point gains increased significance, potentially triggering sharp market reactions in the precious metals sector.

Market Forecast

The short-term outlook for silver remains cautiously bullish, but with significant potential for volatility. Upside factors include ongoing geopolitical tensions, particularly escalating cross-border strains between Israel and Lebanon’s Hezbollah, which add a layer of support to precious metals as safe-haven assets.

Additionally, the potential for weaker economic data could support a dovish Fed stance. However, downside risks persist, as strong economic data could reinforce a hawkish Fed outlook, and rising Treasury yields may pressure non-yielding assets like silver. Traders should remain alert to these factors as they navigate the current market environment.

Technical Analysis

The key indicator to watch today is the 50-day moving average at $29.20. Trader reaction to this level will set the tone.

Recovering $29.20 will indicate the return of buyers. If this creates enough upside momentum then look for the rally to possibly extend into a short-term pivot at $30.59. There is a lot of resistance present so if there is a rally, it will be a grinder.

The inability to overcome the $50-day moving average will likely lead to a retest of $28.66. This is a potential trigger point for an acceleration to the downside with $28.02 a potential near-term target.