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Silver (XAG) Daily Forecast: Gains Traction at $29; Bullish Reversal or Sell-off?
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Key Points:
- Silver gains traction around $29, reaching an intraday high of $29.18.
- Geopolitical tensions and Fed rate cut expectations boost silver's safe-haven appeal.
- US dollar weakness and risk-off sentiment support silver prices amidst economic uncertainties.
US Economic Data and Fed Signals Boost Silver Prices
The US dollar has weakened significantly, retreating from a nearly two-month peak due to recent inflation data. It fell to a multi-day low on Monday, supporting silver prices. Key inflation figures released on Friday have bolstered market confidence in potential rate cuts expected in September and December.
This environment typically enhances alternative investments such as silver, as lower interest rates reduce the appeal of holding traditional currencies, prompting investors to seek higher returns in assets like precious metals.
Looking ahead, traders will focus on the US ISM Manufacturing PMI and broader risk sentiment, expected to influence commodities on Monday.
The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index eased to 2.6% annually in May from 2.7% in April. The core PCE Price Index, excluding food and energy prices, also slowed from 2.8% in April to 2.6% in May, marking its lowest annual rate since March 2021.
The easing inflation pressures indicated by the PCE Price Index could weigh on the US dollar further, providing support to silver prices as investors seek inflation-hedging assets amidst expectations of Fed rate cuts.
Political Instability and Economic Data Boost Silver Prices
Political uncertainty from France’s election and issues in Biden’s debates heighten instability, boosting Silver (XAG/USD) as a safe-haven asset. Meanwhile, China’s declining manufacturing and services sectors suggest economic challenges that could dampen industrial demand for silver.
However, the slight uptick in the Caixin Manufacturing PMI indicates resilience in Chinese manufacturing, which may support silver prices.
China’s manufacturing activity declined for the second consecutive month in June, while services activity hit a five-month low. However, the Caixin Manufacturing PMI unexpectedly increased from 51.7 to 51.8 in June, surpassing expectations of 51.2.
Thus, the uncertain political environment and economic challenges in China could increase demand for silver as a safe-haven asset, despite mixed manufacturing data suggesting potential upward pressure on prices.
Short-term Forecast
Silver prices are poised to rise due to Fed rate cut expectations and geopolitical tensions, with immediate support at $28.78 and resistance at $29.36.
Silver (XAG/USD) Price Forecast: Technical Outlook
Silver (XAG/USD)’s trading session today saw a slight decline, with the metal currently priced at $29 on the 4-hour chart. The pivot point is established at $29.15, closely aligned with the 50-day Exponential Moving Average (EMA), suggesting a crucial level for the day.
Resistance levels are set at $29.36, $29.57, and $29.84, indicating potential ceilings for price movements. Conversely, support comes into play at $28.78, $28.58, and $28.32, providing floors that could stall further declines.
With the 200-day EMA at $29.51, the market sentiment leans slightly bearish below $29.15. A move above this mark could shift momentum towards a more bullish outlook, suggesting traders should watch these levels closely for signs of direction change.
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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