Silver (XAG) Daily Forecast: Price Above $28; Will Geopolitics Push Higher?

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Published: Aug 5, 2024, 07:23 GMT+00:00

Key Points:

Silver hits $28.67 as Middle East tensions boost demand for safe-haven assets.
Weak US dollar and lower bond yields continue to support silver's price gains.
Silver traders watch PMI data for potential impact on price and dollar strength.

Silver (XAG) Daily Forecast: Price Above $28; Will Geopolitics Push Higher?

Market Overview

Silver (XAG/USD) began the week with gains, reaching a high of $28.67 before retracing to around $28.16. The initial uptrend was driven by geopolitical tensions in the Middle East, which increased demand for safe-haven assets like silver.

Additionally, the weaker US dollar, influenced by the Federal Reserve’s dovish stance and a soft employment report, has supported silver prices.

Silver traders will closely monitor the US ISM Services Purchasing Managers Index (PMI). The PMI is expected to rise to 51.0 in July from 48.8 in June. A stronger-than-expected PMI could strengthen the US dollar and potentially limit silver’s gains.

Weak US Dollar and Employment Data Boost Silver Prices Amid Rate Cut Hopes

The US dollar remains under pressure due to the Federal Reserve’s dovish stance and weak employment data, which has helped lift silver prices. As a result, US Treasury bond yields and the dollar are likely to remain low, benefiting silver. The market currently sees a 74% chance of a 50 basis-point rate cut by the Fed at the September meeting. However, Chicago Fed President Austan Goolsbee cautioned against overreacting to one month’s data, noting improvements in inflation and job numbers.

In July, US Nonfarm Payrolls rose by 114,000, down from 179,000 in June and below the expected 175,000. The unemployment rate increased to 4.3%, the highest since November 2021, and Average Hourly Earnings rose by 0.2%, below the expected 0.3%.

As a result, the weak US dollar, lower bond yields, and expectations of a Fed rate cut have supported silver prices. Additionally, soft employment data and a rising unemployment rate have enhanced Silver’s appeal as a safe-haven investment.

Middle East Tensions Drive Silver Demand as Geopolitical Risks Rise

Rising tensions in the Middle East are likely to boost safe-haven assets like silver. US Secretary of State Antony Blinken has warned G7 countries that Iran and Hezbollah might soon attack Israel.

In response, US President Joe Biden will meet with the National Security Council to discuss the situation. Israel is considering a preemptive strike on Iran, while Hezbollah has vowed to escalate attacks following Israel’s recent killing of a senior Hezbollah commander and other civilians.

The situation is further complicated by the assassination of Hamas leader Ismail Haniyeh and ongoing skirmishes between Hezbollah and Israeli forces. These escalating conflicts are expected to support silver prices alongside a weaker US dollar and lower bond yields.

Short-Term Forecast

Silver prices have retraced to $28.16 after peaking at $28.67, influenced by geopolitical tensions and a weak US dollar. Market focus on the US ISM Services PMI may impact future price movements, with potential for gains if geopolitical tensions persist and the dollar remains weak.

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver – Chart

Silver (XAG/USD) is currently priced at $28.16, showing a modest increase of 0.04% on the 4-hour chart. The pivot point is set at $28.60, with immediate resistance at $29.15, followed by $29.45 and $29.89.

Key support levels are $27.78, $27.30, and $26.82. The 50-day EMA is $28.63, while the 200-day EMA stands at $29.33, indicating bearish pressure below $28.60.

Silver’s outlook remains bearish if it continues to trade below the pivot. However, a break above $28.60 could lead to bullish momentum, signalling a potential upward move towards the next resistance levels.

About the Author

Arslan Aliauthor

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.