Silver (XAG) Forecast: Prices Plunge 3% as Key Economic Data Looms

Silver Prices Plummet as Traders Await Key Economic Data

Silver prices experienced a sharp decline on Thursday, dropping over 3% as investors engaged in profit-taking ahead of crucial U.S. economic data releases. The precious metal’s downward trend continues after breaking below its 50-day moving average last week.

At 10:50 GMT, XAG/USD is trading $27.93, down $0.97 or -3.35%.

Market Technicals and Targets

Technical analysts are eyeing key support levels for silver. The next significant target is the 50% retracement level at $27.22, followed by the 200-day moving average at $25.84. These levels could provide potential entry points for traders looking to capitalize on the current market movement.

Fundamental Factors Driving the Decline

Several fundamental factors are contributing to silver’s weakness:

1. Weak demand from China and expectations of a slowing Chinese economy are weighing on silver prices.
2. Recent U.S. manufacturing PMI data indicated a contraction, further dampening silver demand.
3. Investors are awaiting U.S. GDP data and the Personal Consumption Expenditure (PCE) index to gauge the Federal Reserve’s potential interest rate decisions.

Central Bank Policy and Interest Rates

Traders are currently anticipating a Fed rate cut in September. The non-yielding nature of silver makes it more attractive in a low-interest-rate environment. If the upcoming PCE data shows slowing inflation, it could support the case for a September rate cut and potentially lead to a resurgence in silver prices.

Long-Term Outlook

Despite the current downturn, a Reuters poll suggests that silver could rally into the end of the year. Factors supporting this outlook include:

1. Election-related uncertainty
2. Rising geopolitical threats
3. Potential increased demand for silver as a safe-haven asset

Market Forecast

The short-term outlook for silver remains bearish, with technical indicators and fundamental factors pointing to continued downward pressure. However, the long-term forecast appears more optimistic, with potential for significant price appreciation if economic conditions align with market expectations. Traders should closely monitor upcoming economic data releases and Fed policy decisions for potential trend reversals.

XAG/USD is in a freefall on Thursday. The strong downside momentum has traders targeting a 50% level at $27.22. We could see a technical bounce on the first test of this pivot. However, if it fails to hold then look for a drive into the 200-day moving average at $25.84.