In today’s financial market update, the price of silver (XAG/USD) has dropped to nearly $29.40 during the North American trading session. This decline is attributed to a rebound in the US Dollar (USD) and an increase in bond yields following the release of better-than-expected preliminary data for the US S&P Global PMI in August.
The US Dollar Index (DXY) has risen to around 101.45 after hitting a seven-month low of 101.00. Additionally, 10-year US Treasury yields have surged to approximately 3.86%. The higher yields on interest-bearing assets have put pressure on non-yielding assets like silver, as they raise the opportunity cost of holding such investments.
The latest flash PMI report indicates that the Composite PMI expanded at a faster rate than anticipated to 54.1, driven by strong demand in the service sector. However, the Manufacturing PMI saw a significant decline to 48.0. Economists had expected a contraction in manufacturing activities but at a more gradual pace to 49.6.
Investors are now eagerly awaiting Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium, which is scheduled to begin at 14:00 GMT and continue through Saturday. Powell’s remarks are expected to provide insights into the extent of interest rate cuts in September and beyond.
The CME FedWatch tool indicates a 26.5% probability of a 50-basis point interest rate cut, while most signs point to a quarter-point reduction in borrowing rates. This suggests that traders are confident in the Fed’s move towards policy normalization in September.
Silver Technical Analysis
The price of silver has stabilized after breaking above the August 2 high of $29.20, disrupting the lower high lower low pattern on a four-hour timeframe. The 20-period Exponential Moving Average (EMA) near $29.20 is now acting as a support level for silver bulls.
A bullish cross between the 50 and 200-day EMAs near $28.50 indicates a strong bullish trend overall. Despite the 14-period Relative Strength Index (RSI) falling to around 60.00, the bullish bias remains intact.
Silver Four-Hour Chart
Silver FAQs
Here are some frequently asked questions about silver:
What is Silver?
Silver is a precious metal that is traded among investors and has historically been used as a store of value and a medium of exchange.
What Factors Influence Silver Prices?
Silver prices can be influenced by factors such as geopolitical instability, interest rates, US Dollar performance, investment demand, and industrial usage.
How is Silver Used in Industry?
Silver is widely used in industries like electronics and solar energy due to its high electric conductivity.
How Do Silver Prices Relate to Gold?
Silver prices often follow gold prices, and the Gold/Silver ratio can help determine the relative valuation between the two metals.
Analysis:
In summary, the recent drop in silver prices can be attributed to a stronger US Dollar and rising bond yields. Investors are closely watching for signals from the Federal Reserve regarding potential interest rate cuts. The technical analysis suggests a bullish trend for silver, with key support levels identified. Understanding these factors can help individuals make informed decisions about their investments and financial strategies.