Silver (XAG) Forecast: Bearish Signals Emerge as Price Breaks 50-Day MA; Silver Analysis Points Down

Silver Prices Diverge from Gold, Face Potential Downside

Silver prices are experiencing sharp declines on Friday, breaking below the 50-day moving average at $30.19. This level now serves as resistance, with sellers potentially targeting the recent bottom at $28.57.

At 11:19 GMT, XAG/USD is trading $29.15, down $0.68 or -2.28%.

Bearish Signals Emerge

Despite hovering near an 11-year high early last week, silver is now showing bearish signals. The metal’s performance has diverged from gold, which was moving towards record highs. This divergence intensified throughout the week, culminating in Friday’s downturn for both metals.

Economic Factors Weigh on Silver

A stronger dollar and higher Treasury yields are pressuring both gold and silver. Additionally, signs of a weakening economy are impacting industrial demand for silver, further contributing to its price decline.

Fed Rate Cut Expectations

Market expectations for a Federal Reserve interest rate cut in September have been a key driver of silver’s recent performance. The CME FedWatch tool shows a 98% probability of a rate cut at that meeting. However, this high certainty may have created a “buy the rumor, sell the fact” scenario, potentially trapping late buyers.

Fed Officials’ Stance

Recent comments from Federal Reserve officials have added complexity to the rate cut outlook. San Francisco Fed President Mary Daly emphasized the need for more data confirming sustainable inflation reduction. Fed Governor Christopher Waller suggested the central bank is approaching a point where rate cuts may be warranted, but cautioned that the “final destination” hasn’t been reached.

Market Forecast

The short-term outlook for silver appears bearish, with potential for further downside. The break below the 50-day moving average and divergence from gold’s performance signal weakness. Traders should watch for a possible test of the $28.57 support level. However, the long-term outlook remains cautiously optimistic, contingent on Fed policy decisions and economic data releases. Investors should closely monitor next week’s personal consumption expenditure price index for further clues on the Fed’s potential actions.

Technical Analysis

The intermediate trend for silver turned bearish on Thursday as sellers decisively broke below the 50-day moving average. This price action establishes $30.19 as a new resistance level, with $28.57 emerging as the next significant downside target.

While a technical rebound might occur if silver tests the $28.57 level, the current strong downward momentum suggests this support could be breached. If that happens, traders are likely to focus on the 200-day moving average at $25.71 as the next key level to watch.