Silver (XAG) Daily Forecast: Fed Caution and Geopolitics to Keep Prices Above $31

By:

Arslan Ali

Published: May 22, 2024, 07:58 GMT+00:00

Key Points:

Silver under pressure due to strong US dollar and Fed caution.
Geopolitical tensions provide support, limiting silver’s decline below $31.10.
Technically, silver remains bullish above the pivot point of $31.45.

In this article:

Silver

-0.82%

Market Overview

The XAG/USD price forecast indicates continued pressure on silver prices, currently trading around $31.87 after reaching an intraday low of $31.59. The broad-based strength of the US dollar, driven by cautious statements from Federal Reserve officials regarding inflation, is a key factor influencing this trend.

Federal Reserve’s Impact on Silver Price

Members of the Federal Reserve have emphasized the need for stronger evidence of easing inflation before considering interest rate cuts. Fed Governor Christopher Waller highlighted the necessity for convincing data, while Atlanta Fed President Raphael Bostic stressed the importance of caution in the first rate move, preferring to wait for stable inflation.

Cleveland Fed President Loretta Mester noted that a robust job market alleviates concerns about maintaining restrictive rates, and Boston Fed President Susan Collins pointed out that any progress towards lower rates will be gradual.

Financial markets expect the first rate cut no sooner than September, with projections of two quarter-point reductions by the end of the year. This stance has strengthened the US dollar, thereby pressuring silver prices.

Geopolitical Factors Supporting Silver Price

On the flip side, escalating tensions between the US and China have had a mixed impact on the market. The US recently announced tariff hikes on various Chinese goods, prompting potential retaliatory measures from China, such as higher temporary tariffs on imported cars with large engines.

Additionally, ongoing geopolitical tensions in the Middle East further contribute to market uncertainty. These developments could enhance silver’s appeal as a safe-haven asset, potentially limiting further declines in its price.

Market Reactions and Forecast

Despite the recent downward trend, the renewed US-China trade tensions and persistent geopolitical issues in the Middle East are likely to support silver prices.

The current cautious stance of the Federal Reserve on inflation, coupled with the expectation of prolonged high interest rates, has bolstered the US dollar. However, these geopolitical concerns may provide a floor for silver prices, mitigating deeper losses.

Short-Term Forecast

Silver (XAG/USD) is expected to remain under pressure due to a strong US dollar and cautious Fed stance, but geopolitical tensions may provide support, limiting further declines below $31.10.

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver Price Chart

Silver is trading at $31.87, down 0.28%. On the 4-hour chart, the pivot point is $31.44. Key resistance levels are $32.07, $32.53, and $33.09, while support levels are $31.10, $30.76, and $30.27. The 50-day EMA stands at $31.06, and the 200-day EMA is at $29.09.

An upward trendline supports the likelihood of a bullish trend continuation, especially above $31.45. Technically, silver remains bullish above the pivot point of $31.45, indicating potential for further upward movement.

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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