Silver Prices Forecast: XAG/USD Shows Resilience Amidst Rising Rates

Highlights

• Silver (XAG/USD) jumps 1.15% even amid a strengthening dollar and rising bond yields.
• Central banks hint at persistent high rates, fueling concerns over global economic slowdown.
• The Federal Reserve maintains its rate strategy but hints at possible hikes through 2024.
• CME FedWatch suggests a near-even split between prospects of rate hikes and cuts by 2024.
• Silver’s future largely contingent on Treasury yield trends and Federal Reserve’s next moves.

Silver’s Response to Interest Rates

Silver (XAG/USD) marked an increase of 1.15%, settling at $23.702 per ounce on Friday. Despite a robust dollar and ascending bond yields, silver’s resilience emerges as central banks signal the retention of high interest rates. The underlying concern? Potential deceleration of global economic growth.

USD Dynamics and Treasury Yields

The U.S. dollar remains formidable, nearing a six-month pinnacle, while the 10-year Treasury yields touch a 16-year zenith. This has put equities under duress. Silver, traditionally a safe-haven asset, grapples with these heightened interest rates, which tend to weigh on metals not yielding interest.

Federal Reserve’s Outlook

The Fed remains consistent in its rate approach, though there’s buzz about a probable rate augmentation this year, extending through 2024. This perceived hawkishness briefly pressured silver prices. However, post-FOMC spot silver depicts a more tempered dip, suggesting an anticipatory sentiment for a forthcoming U.S. rate moderation.

Market Anticipation and Indicators

Per the CME FedWatch tool, the market senses a 45% chance for another rate upswing this year and a 44% probability for rate retractions by early 2024. Contextualizing this sentiment is the Bank of Japan’s stance on sustaining ultra-low rates and the imminent PMI data release from key economies like the UK, U.S., and the Eurozone.

Short-term Forecast:  Leaning Toward Bullish

In the prevailing financial ecosystem, silver’s upward trajectory is closely tied to the evolution of Treasury yields. With these yields at notable highs, the silver market remains vigilant to upcoming U.S. employment figures and the Federal Reserve’s ensuing strategies. The prevalent sentiment? A cautious optimism veering toward a bullish disposition for silver.

Technical Analysis

The current 4-hour price of 24.015 showcases an advancement compared to the previous 4-hour close of 23.855. When observing the moving averages, the commodity is trading above both the 200-4H moving average (23.524) and the 50-4H moving average (23.374), indicating an underlying bullish momentum.

The 14-4H RSI reading of 64.35 supports this sentiment, sitting above the 50 threshold but below the overbought level, suggesting increasing but not extreme momentum.

With the current price above the main support area (23.330 to 23.105) and below the main resistance range (25.170 to 25.455), it reveals a bullish market sentiment for the short-term, as the commodity seeks to challenge higher resistance levels.