Silver Prices Forecast: XAG/USD Gains on Weaker Dollar, Geopolitical Tensions

Highlights

• Silver rises in thin holiday trade
• Lower Treasury yields, dollar weakness boost XAG/USD
• Geopolitical tensions, Fed cuts shape silver outlook

Holiday Trading Lifts Silver

Silver (XAG/USD) prices are experiencing an uptick in the holiday-thinned market following the Christmas break. Despite the low volume due to market closures in regions like Australia, New Zealand, Hong Kong, and the Euro Zone, silver prices are showing resilience. This pattern of muted trading is expected to continue until the end of the year, with normal trading activity anticipated to resume post-January 1.

Current Market Position

As of 07:30 GMT, Silver (XAG/USD) is priced at $24.35, marking an increase of $0.11 or +0.44%. This upward trend during the holiday season, although modest, is a noteworthy shift in the precious metals market.

Influence of U.S. Market Trends

Silver’s rise can be attributed to the lower U.S. Treasury yields and a weakening U.S. Dollar in early Tuesday trades. The likelihood of the Federal Reserve cutting interest rates as early as March 2023 is playing a pivotal role in this upward movement. The dovish rate expectations, reinforced by recent U.S. personal consumption expenditure data, are shaping market sentiment.

Outlook Amid Economic and Geopolitical Factors

While the market seems bullish for silver in the short term, traders are adopting a cautious approach. The anticipation of Federal Reserve policy changes and ongoing geopolitical tensions, especially U.S. military actions in response to attacks in Iraq, are contributing to silver’s status as a safe-haven asset. This geopolitical climate, coupled with market expectations of a dovish Federal Reserve, paints a cautiously optimistic picture for silver’s near-term performance.

Technical Analysis

Silver (XAG/USD), currently trading at $24.37, is positioned just above both its 200-day and 50-day moving averages, at $23.64 and $23.55 respectively. This placement indicates a bullish trend, as the current price not only surpasses these key averages but also hovers near the minor resistance level of $24.50.

Overcoming this resistance could signal further upward momentum, potentially targeting the major resistance at $25.91. Conversely, any pullback should find robust support at the minor level of $23.55, with more significant support at $22.23.

Given its position relative to these averages and support-resistance levels, market sentiment for silver appears bullish in the short term, with an eye on the $24.50 level for confirmation of continued upward movement.