Silver (XAG) Forecast: Will Prices Bounce Back After This Week’s Decline? Key Trends to Watch

Silver Stumbles: Weekly Decline Looms as Fed Watch Intensifies

Silver prices remained subdued on Friday, heading for another large weekly decline. Investors are closely monitoring economic indicators for clues about potential U.S. interest rate cuts in September, while awaiting next week’s inflation data.

At 11:28 GMT, Silver (XAG/USD) is trading $27.52, down $0.03 or -0.09%.

Monday’s Meltdown: Equities Drag Silver Down

The precious metal experienced a sharp drop on Monday, mirroring a broader equities selloff. Despite this setback, silver has shown resilience by maintaining support above the 200-day moving average. However, traders remain cautious, recognizing this level as a potential trigger point for further downside movement.

Chart Watchers Take Note: A Range-Bound Battlefield

This week’s price action reveals a developing trading range, with buyers respecting the 200-day moving average as support and the 50-day moving average as resistance. This pattern suggests a potentially wide trading range in the near term.

Fed’s Tightrope Walk: Inflation Cooling, Rate Cuts Brewing?

Federal Reserve policymakers anticipate that cooling inflation will pave the way for rate cuts, emphasizing that decisions will be guided by economic data rather than stock market volatility. According to the CME FedWatch Tool, markets currently price in a 55% probability of a 50-basis-point cut in September, with an additional cut expected in December.

Jobs Data Surprise: Labor Market Shows Resilience

Recent U.S. jobless claims data came in better than expected, alleviating concerns about labor market weakness. Investors are now turning their attention to upcoming U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) releases for further insights into the Fed’s policy trajectory.

Silver’s Shining Potential: Bullish Winds on the Horizon?

Despite the current downtrend, silver’s outlook remains cautiously optimistic. The metal is well-positioned to benefit from either increased risk aversion or expectations of looser monetary conditions. Multiple scenarios could potentially drive silver prices to multi-month highs in the coming months, suggesting a bullish long-term outlook for traders willing to weather short-term volatility.

Technical Analysis

Silver (XAG/USD) is slowing becoming rangebound with support the 200-day moving average at $26.11 and resistance the 50-day moving average at $29.41. Additional support is a 50% retracement level at $27.22, while new resistance is the 50% retracement level at $29.54.

The daily chart indicates the way of least resistance is up, but it order to move higher, a new bullish catalyst needs to emerge. Relatively cheap prices can only get you so far. Sure, they attract buyers, but that only stops the market from going lower. The new catalyst has to encourage buyers to chase the market higher.