Silver (XAG) Forecast: Will Fed Signals Propel Silver Past $29.23 Resistance?

Silver Pauses as Investors Await Fed Signals

Silver prices edged lower on Monday, retreating from a three-week high reached last week. The precious metal surged alongside gold, which hit an all-time high above $2,500 per ounce on Friday. This surge was fueled by strong safe-haven demand and heightened expectations of an imminent U.S. interest rate cut. Silver is currently trading just below its 50-day moving average of $29.20, with resistance at $29.23. Breaching these levels could trigger a quick move towards $29.50, potentially leading to a more significant rally.

At 12:11 GMT, XAG/USD is trading $28.99, down $0.04 or -0.15%.

Fed Rate Decision in Focus

Traders are closely monitoring the upcoming speech by Federal Reserve Chair Jerome Powell at the Jackson Hole symposium on Friday. Powell’s remarks are expected to provide crucial insights into the Fed’s next steps, particularly regarding a possible rate cut in September. While the market is pricing in a 25-basis-point cut, there is some speculation about a larger 50-basis-point reduction. Powell’s speech will be scrutinized for any signals that could influence market expectations, especially after recent data suggested that inflation is cooling, and the U.S. job market is showing signs of slowing.

Strong U.S. Economic Data

Recent U.S. economic indicators have been mixed but generally supportive of a resilient economy. Strong retail sales and lower-than-expected unemployment claims, coupled with mild inflation data, have boosted confidence in the U.S. economy. The minutes from the Fed’s July policy meeting, set to be released on Wednesday, will also be analyzed for further clues on the central bank’s stance. The Fed had kept rates unchanged in July, allowing more time to assess whether current rates are effectively controlling inflation without stifling growth.

China’s Economic Struggles Impact Silver Demand

Silver traders are also keeping an eye on China, where weak economic data has dampened demand for the metal. China’s industrial output slowed for the third consecutive month in July, signaling a loss of momentum in the world’s second-largest economy. Although retail sales improved slightly, the overall outlook remains uncertain, with ongoing challenges in the property sector and subdued consumer spending. The Chinese government has been ramping up policy support, but analysts warn that more aggressive measures may be needed to sustain economic growth.

Short-Term Market Outlook

Given the current market conditions, silver’s short-term outlook remains cautiously bullish. The metal’s ability to break through key technical levels will be critical, especially as traders await more definitive signals from the Fed and developments in China. If silver manages to clear the $29.23 resistance level, a rally towards $29.50 or higher could materialize, particularly if the Fed leans towards a more dovish stance. However, any disappointment from Powell’s speech or further weakness in China could cap gains and lead to consolidation below current levels.

Technical Analysis

Despite an early setback on Monday, XAG/USD remains poised to overtake a resistance cluster at $29.20 – $29.23, the former being the 50-day moving average and the latter being the August 2 main top. The first upside target is a pivot at $29.50. This is the last potential resistance before the pair of main tops at $31.76 and $32.52.

On the flipside, there is room to the downside if the buying dries up. The nearest target is a short-term pivot at $27.85.