Silver (XAG) Daily Forecast: Buying Over $26.46 Amid Middle East Tensions

By:

Arslan Ali

Published: May 1, 2024, 07:44 GMT+00:00

Key Points:

Silver prices rallied to $26.4605, buoyed by Middle East tensions enhancing its safe-haven appeal.
China's ongoing gold buying spree since October 2022 boosts correlated silver prices.
Investors eye Federal Reserve's decision and key U.S. economic indicators impacting precious metals.

In this article:

Silver

-0.96%

Market Overview

Despite the Federal Reserve’s firm stance and a strengthening US dollar, silver prices (XAG/USD) managed to reverse their minor losses from the previous day, rallying to an intraday high of 26.4605 from 26.3965. This gain is largely due to heightened geopolitical tensions in the Middle East, which typically increase the appeal of traditional safe-haven assets like silver and gold.

Additionally, China’s continuous gold purchases since October 2022—the longest such streak since at least 2000—are pushing gold prices higher, which in turn supports silver prices due to their market correlation.

As investors await the Federal Reserve’s upcoming monetary policy decision, they are also monitoring key US economic indicators like the ISM Manufacturing PMI and ADP Employment Change. These factors could sway market sentiment and impact the prices of precious metals.

Impact of Fed’s Hawkish Stance on US Dollar and Metals

On the US front, the broad-based US dollar maintained its upward momentum, reaching a weekly high of 106.40. This surge was fueled by the Fed’s hawkish stance on interest rates. The Federal Reserve is expected to keep interest rates unchanged at its May meeting and maintain its hawkish stance.

Besides, expectations for Fed easing have declined, with the likelihood of a June cut standing at around 10% and the probability of September rate cuts falling below 75%, according to the CME FedWatch tool.

Investors will be closely watching the Press Conference following the Fed meeting for further guidance. Therefore, the Fed’s hawkish tone could bolster the US dollar and cap further gains in the precious metals.

Impact of Geopolitical Tensions on Silver Price

On the geopolitical front, tensions are escalating as Israeli Prime Minister Benjamin Netanyahu announces plans for Israeli forces to enter Gaza’s southern city of Rafah, despite a ceasefire deal with Hamas. Meanwhile, UN chief Guterres expresses dissatisfaction with the slow progress on Gaza aid, urging Israel to prioritize the safety of humanitarian workers and facilitate urgent aid delivery to the enclave.

In the meantime, the International Court of Justice rejects Nicaragua’s request for emergency measures regarding German arms sales to Israel. In the United States, protests against Israel’s attacks persist, resulting in over 900 arrests in the past 11 days. However, the death toll from Israeli attacks on Gaza since October 7 has surpassed 34,000 Palestinians killed and nearly 78,000 wounded.

Therefore, geopolitical tensions, especially in Gaza, could impact the silver price, as investors seek safe-haven assets like precious metals amid uncertainty, leading to increased demand and upward pressure on silver prices.

Silver (XAG/USD) Price Forecast

Silver – Chart

Silver is currently priced at $26.4415, marking an increase of 0.60%. The metal is trading above its pivot point of $26.27, suggesting a potential bullish bias in the market. Immediate resistance for silver is seen at $26.95, with further ceilings at $27.76 and $28.79. Conversely, support levels are established at $25.76, $25.23, and $24.76, which will be crucial if the price retreats.

The 50-Day and 200-Day Exponential Moving Averages are positioned at $26.96 and $27.26, respectively, closely aligning with current prices and indicating significant levels of both support and resistance.

A bullish engulfing candle formation near the $26.45 support area could stimulate a buying trend, reinforcing the bullish sentiment. However, should silver fall below its current pivot point at $26.27, it could signal a shift to a bearish outlook for the commodity. Silver displays a potential for further gains if it remains above $26.27, with key technical indicators supporting a bullish scenario moving forward.

About the Author

Arslan Aliauthor

Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.

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