Silver (XAG) Forecast: Fed Cuts Fuel Rally – Will $32 Resistance Break?

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Updated: Sep 24, 2024, 12:12 GMT+00:00

Key Points:

Silver prices inch higher as traders eye $31.76 and $32.52 resistance levels amid Chinese stimulus and Fed rate cut expectations
Fed's 50 basis point rate cut catalyzes silver rally, reducing opportunity cost of holding non-yielding assets like precious metals
China's substantial stimulus package aims to combat deflation but may redirect investments, creating complex silver market dynamics
Traders await Fed Chair Powell's remarks and PCE data for insights on monetary easing, potentially influencing silver prices

Silver Climbs as Fed Rate Cut Prospects Boost Appeal

Silver prices are inching higher on Tuesday, with traders cautiously eyeing resistance levels at $31.76 and $32.52. This upward movement comes amid fresh Chinese stimulus measures and growing expectations for additional Federal Reserve rate cuts.

At 11:55 GMT, XAG/USD is trading $30.84, up $0.15 or +0.48%.

Daily Silver (XAG/USD)

Technical Levels: Support and Resistance in Focus

The precious metal currently finds minor support at the former top of $30.19, with additional support levels at $29.72 and a major pivot at $29.50. The 50-day moving average serves as the primary support, though its current flat trajectory is not providing significant momentum.

Fed’s Dovish Stance Fuels Silver’s Rally

Last week’s larger-than-expected 50 basis point interest rate cut by the Federal Reserve has been a key catalyst for silver’s recent rally. This reduction in rates has decreased the opportunity cost of holding non-yielding assets like silver, enhancing its appeal to investors. Chicago Fed President Austan Goolsbee’s indication of potential further rate cuts in the coming year has bolstered the bullish outlook for silver.

China’s Stimulus Package: Double-Edged Sword for Silver

China’s central bank has introduced its largest stimulus package since the pandemic, aiming to combat deflationary pressures. While this initiative could potentially boost Chinese bullion demand, it may also redirect investments toward Chinese equities and real estate. This dual effect creates a complex situation for silver markets, as investors weigh the potential impacts on demand and price movements.

Geopolitical Tensions Underpin Safe-Haven Demand

Silver has surged over 30% in 2024, supported by ongoing Middle East conflicts and increased central bank demand for safe-haven assets. Tensions between Israel and Hezbollah have further solidified silver’s status as a store of value, with Israeli military actions in Lebanon adding to global geopolitical concerns.

Key Economic Data on Traders’ Radar

Traders are now focusing on critical U.S. economic data releases, particularly Fed Chair Jerome Powell’s remarks on Thursday and Friday’s Personal Consumption Expenditures (PCE) data. These events are anticipated to provide insights into the Fed’s stance on additional monetary easing, potentially influencing silver prices.

Market Forecast: Bullish Trend with Cautionary Notes

The short-term outlook for silver appears bullish, contingent on upcoming economic data supporting the current dovish sentiment. If the PCE data and Powell’s comments align with expectations of continued monetary easing, silver could see further price appreciation.

Traders should watch for a potential break above the $31.76 resistance level as a signal for extended gains. However, caution is warranted near current resistance levels, and any short-term corrections may present buying opportunities for investors looking to increase their exposure to the metal.

About the Author

James Hyerczykauthor

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.