Silver Prices Forecast: XAG/USD Holds Ground as Gold Tests 5-Month Low

Highlights

• Rising 10-year Treasury yields impact gold, but silver maintains stability.
• Silver’s upside tied to anticipated rate cuts in 2024, safe-haven appeal wanes.
• Fed’s cautious stance and rate hikes shape silver and gold landscape.
• Set up for potential breakout on 4-Hour chart. All eyes on 50-4H moving average. 

Overview

Silver (XAG/USD) is showing resilience by maintaining this week’s multi-month low, indicating potential oversold conditions or that negative Federal Reserve news might be fully priced in. In contrast, gold prices are undergoing a testing phase, hovering near a 5-month low as the U.S. dollar and Treasury yields surge, driven by positive economic data. This development reinforces expectations of the Federal Reserve’s continuous policy tightening.

Fed’s Inflation Concerns

Following the July meeting, policymakers remain committed to addressing inflation concerns, acknowledging the risks associated with aggressive rate hikes. Despite 11 rate hikes since March 2022, inflation worries persist, potentially leading to further monetary tightening.

10-Year Treasury Hits 10-Month High

As benchmark 10-year U.S. Treasury yields reach a 10-month high and the dollar rises to mid-June levels, gold is affected, though silver appears relatively unaffected today. Fed meeting minutes signaled more rate hikes, hinting at potential yield spikes. Spot silver (XAG/USD) remains relatively stable, albeit cautiously.

Silver Still Vulneable if Support Zone Fails

Amid rising yields and dollar strength, spot silver could face a decline towards $22.00 per ounce after breaking crucial support levels. U.S. yield and dollar index levels will likely influence market sentiment, possibly marking a significant turning point. Analysts anticipate silver price volatility, particularly driven by U.S. rate-related commentary.

Long-Term Direction Hinges Upon Timing of Fed Rate Cuts

Silver’s potential upside hinges on anticipated rate cuts in 2024. Despite robust U.S. economic data defying recession predictions, silver’s safe-haven appeal wanes, reflecting reduced investor interest during economic uncertainty.

Short-Term Outlook:  Set-up for Short-Covering Rally

In conclusion, while silver diverges from gold’s trajectory, it remains uncertain whether this signifies the beginning of a substantial short-covering rally. A significant rally isn’t expected given rising yields and a strengthening dollar, along with uncertainty surrounding the Fed’s upcoming rate decision in September.

The Federal Reserve’s cautious stance on inflation and ongoing rate hikes will shape the current silver and gold market landscape. Both metals face pressure from increasing yields, yet the possibility of rate cuts in 2024 could serve as a catalyst for price rebounds, making silver particularly attractive to long-term speculators.

Technical Analysis

The current 4-hour price of Silver (XAG/USD) at 22.65 indicates a slight increase from the previous 4-hour close of 22.51. The market price is positioned just below the 200-4H moving average of 23.73, suggesting potential resistance. The 50-4H moving average at 22.76 is also nearby, indicating a close proximity to this key level. The 14-4H RSI reading of 50.60 falls within the neutral zone, implying a balanced momentum.

Silver’s current price aligns with the main support area of 22.70 to 22.28, suggesting a stabilizing effect. The main resistance area of 23.60 to 23.85 indicates potential hurdles for price advancement. Given the proximity to both moving averages and the neutral RSI, the market sentiment appears cautious. Overall, considering the support and resistance levels, the market sentiment remains neutral.

All eyes are on the 50-4H moving average at 22.76. This is a potential trigger point for an acceleration to the upside on the 4-hour chart.