Silver Prices Forecast: XAG/USD Drops as Investors Lock in Profits

Silver Prices Retreat as Investors Book Profits

Silver slipped on Monday as investors took profits after recent U.S. jobs data propelled prices to their highest level in nearly a month. Spot silver fell, retracing gains made on Friday, when prices hit their peak since June 7.

At 11:54 GMT, XAG/USD is trading $31.04, down $0.19 or -0.59%.

Impact of U.S. Jobs Data

Silver prices surged last Friday following the release of key U.S. jobs data, which indicated a softening labor market. This data bolstered expectations for a Federal Reserve interest rate cut in September. Specifically, U.S. non-farm payrolls grew by 206,000 jobs in June, surpassing the 190,000 jobs estimated by economists. However, job growth estimates for May and April were revised downward, with May’s figures adjusted to 218,000 from 272,000 and April’s to 108,000 from 165,000. Additionally, the unemployment rate rose to 4.1%, slightly above the anticipated 4.0%.

Market Reactions

Following the jobs report, U.S. interest-rate futures prices indicated a sustained market confidence in a September rate cut, with the implied probability remaining at about 72%. Traders are also increasingly pricing in the likelihood of a second rate cut in December. Lower interest rates reduce the opportunity cost of holding non-yielding silver, contributing to the bullish sentiment.

Currency and Treasury Yield Movements

The U.S. dollar fell to a three-week low against other currencies after the jobs data release, making silver cheaper for holders of other currencies. Concurrently, the yield on the benchmark U.S. 10-year Treasury note decreased, providing further support to silver prices. Despite Monday’s profit-taking, the outlook remains influenced by key economic data due throughout the week, including fresh insights into inflation.

Outlook and Forecast

Looking ahead, investors are closely monitoring upcoming economic data that could influence the Federal Reserve’s monetary policy decisions. June’s consumer price index and the producer price index are both expected this week, along with testimony from Federal Reserve Chairman Jerome Powell. These events could provide clearer signals on the timing of potential rate cuts.

Given the current market conditions, the short-term forecast for silver remains cautiously bullish. If the upcoming economic data aligns with expectations of a softening labor market and easing inflation, silver prices could aim for a return to $32.52, an 11-year high, especially if the Federal Reserve signals a September rate cut.

Despite Monday’s slight pullback, the uptrend remains well-intact. If upside momentum returns then look for a short-term surge into $32.52.

With the trend up, buyers are likely to return at key support levels like the 50% price at $30.59 and the 50-day moving average at $29.59. The latter is controlling the intermediate trend and has been steering prices higher since March 1.