Silver Prices Forecast: XAG/USD Spikes Higher Ahead of ADP Data, FOMC Minutes

Silver Market Surges Ahead of Holiday and Key Economic Data

Silver prices surged on Wednesday, driven by a holiday-shortened trading session and anticipation of critical economic data releases and Federal Reserve insights.

At 11:55 GMT, XAG/USD is trading $30.17, up $0.64 or +2.18%.

Thin Trading and Upcoming Data Releases

U.S. futures markets are set to close early on Wednesday and remain shut on Thursday in observance of Independence Day. This schedule is expected to keep trading volumes low throughout the week. Traders are closely watching the ADP National Employment report and weekly jobless claims, set for release at 12:15 GMT and 12:30 GMT, respectively.

This follows Tuesday’s data, which revealed an increase in U.S. job openings and layoffs in May, ahead of Friday’s significant non-farm payrolls data. In addition to employment reports, traders will scrutinize factory orders, services PMIs, and the latest import and export figures.

The June jobs report on Friday, which includes non-farm payrolls and the unemployment rate, will be pivotal in determining the future direction of the economy and interest rates.

Employment Trends and Fed Policy

Market analysts predict a slowdown in employment data over the coming months. If this trend continues alongside a steady disinflation path, it is likely the Federal Reserve will implement a rate cut in September, which could bolster silver prices. According to LSEG’s FedWatch data, there is a 65% probability of a rate cut in September and an expectation of two cuts by year-end.

Fed Meeting Minutes and Powell’s Remarks

The Fed’s June meeting minutes, due at 18:00 GMT, are eagerly awaited by investors for insights into policymakers’ perspectives on inflation and monetary policy. On Tuesday, Federal Reserve Chair Jerome Powell acknowledged progress towards disinflation but emphasized the need for more data before committing to rate cuts. Powell stated, “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”

Market Sentiment and Forecast

Silver prices continued their upward momentum on Tuesday, marking the fourth consecutive session of gains. This positive trend coincided with Powell’s comments on the disinflationary path and the need for sustained economic data before altering interest rates. U.S. Treasury yields remained steady as investors prepared for upcoming data releases.

Short-term Market Forecast

Given the current economic indicators and Federal Reserve outlook, the short-term forecast for silver appears bullish. Anticipation of potential rate cuts in the coming months, coupled with positive employment and inflation data, supports a favorable environment for silver prices. Traders should remain vigilant, however, as the market responds to the upcoming economic reports and Fed policy developments.

Technical Analysis

XAG/USD is up for the fifth straight session on Wednesday. The price action indicates that traders are building on the momentum created earlier in the week when the market crossed to the strong side of the 50-day moving average at $23.94. This level is new support.

The first upside target is a pivot at $30.60, followed by a minor top at $30.85. The latter is a potential trigger point for a further acceleration to the upside.