Silver Prices Forecast: XAG/USD Dips Ahead of US Labor Market Report

Highlights

• Silver prices drop, investors eye U.S. payrolls data.
• Fed rate cut expectations spur silver demand.
• Treasury yield shifts impact silver’s short-term outlook.

Subdued Price Action

Silver prices are lower on Thursday, with XAG/USD trading at 23.89 and March Comex silver at 24.23 as of 07:34 GMT. The drop reflects a combination of profit-taking and position-squaring ahead of the U.S. payrolls data release on Friday. This cautious trading approach comes after silver firmed up, responding to easing Treasury yields.

Economic Data Influencing Silver

The U.S. labor market is showing signs of slowing down, a factor closely watched by silver traders for interest rate direction. Weaker-than-expected economic data is fueling expectations of a Federal Reserve rate cut, a scenario typically beneficial for silver prices. Recently, silver peaked before retreating, indicating market uncertainty over the timing of these potential rate cuts.

Fed Policy and Market Reaction

Fed officials’ dovish statements and a 60% market expectation of a rate cut by March are driving silver investment demand. With traders anticipating easier monetary policy, silver is gaining traction as a preferred asset in such an interest rate environment.

Treasury Yields and Labor Data Impact

Benchmark 10-year Treasury yields hitting a three-month low and labor market cooling, as indicated by recent job opening figures, are key factors affecting silver prices. The disparity between the 10-year and 2-year Treasury yields adds another layer to market sentiment.

Short-Term Forecast

The dollar’s current strength is playing a significant role in silver pricing. With the dollar index showing little change, traders are awaiting the non-farm payrolls data for further market cues.

The market’s aggressive pricing for Fed rate cuts and geopolitical tensions are also key drivers for silver. Overall, the short-term outlook for silver prices remains cautious but bullish with traders attentive to these economic indicators.

Technical Analysis

The current daily price of silver (XAG/USD) at 23.86 is positioned above both the 200-day moving average (23.48) and the 50-day moving average (23.06), signaling a bullish trend in the medium to long-term perspective.

However, it’s important to note that the price is hovering slightly above the minor support level of 23.55, suggesting a delicate balance at this point. It’s closer to the minor resistance level at 24.50 than the main support level at 22.23, indicating potential for upward movement, yet the proximity to minor resistance could also imply resistance to further gains.

Overall, while the market sentiment leans towards bullish given its stance above key moving averages and support levels, the closeness to the minor resistance level suggests a cautious outlook, with the possibility of a consolidation phase or a test of the resistance level in the near term.