Silver (XAG) Daily Forecast: Can PBoC Liquidity Drive Silver Prices Above $32 Resistance?

Market Overview

Silver (XAG/USD) started the week on a slightly bearish trend but held above the critical support level of $30.98. The cautious sentiment in the market comes ahead of the US Purchasing Managers Index (PMI) data, set to be released later today.

Despite this, silver prices remain buoyed by a weaker US dollar, which has been under pressure following hints from the Federal Reserve about possible rate cuts later this year.

The Federal Reserve’s recent 50 basis point rate cut has further strengthened silver’s appeal as a non-interest-bearing asset. The Federal Open Market Committee’s (FOMC) unexpected decision was a key driver behind the downward pressure on the dollar, leading investors to consider silver as a safe haven.

China’s Liquidity Injection Supports Industrial Demand for Silver

Meanwhile, in China, the People’s Bank of China (PBoC) took steps to support liquidity, injecting CNY 74.5 billion through a 14-day reverse repo operation. The bank lowered the interest rate from 1.95% to 1.85%, signaling its effort to stimulate economic activity.

Additionally, the PBoC provided another CNY 160.1 billion through a 7-day reverse repo at an unchanged rate of 1.7%. This liquidity injection, coupled with stable Loan Prime Rates (LPR) at 3.35% for the one-year and 3.85% for the five-year terms, could increase industrial demand for silver in the coming months.

As liquidity flows into the economy, manufacturing activity may pick up, driving demand for silver in industrial applications, further stabilizing its prices. Silver’s role as a safe-haven asset, combined with a weaker dollar and rising industrial demand, points to a potential uptick in prices as 2024 progresses.

Short-Term Forecast

Silver (XAG/USD) remains above the $30.98 support, with a potential breakout above $31.42 targeting $31.75 and $32.08. Downside risks include support at $30.72 and $30.27.

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver (XAG/USD) is currently trading at $30.98, down by 0.23%. The market appears to be consolidating near the pivot point of $31.13, which is acting as a critical level for further price action.

If silver breaks above immediate resistance at $31.42, we could see a move toward the next targets of $31.75 and $32.08.

On the downside, key support lies at $30.72, with further levels at $30.27 and $29.90. The 50-day EMA at $30.38 offers solid support, and as long as silver holds above $30.75, the overall outlook remains bullish. However, a drop below this level could lead to sharper declines. Traders should keep an eye on these levels.