As the silver price (XAG/USD) tries to surpass the critical $30 level, it faces challenges in Tuesday’s New York session. The current outlook for the white metal remains positive due to expectations of interest rate cuts by the Federal Reserve (Fed) starting in September. Investors are eagerly awaiting the US core PCE inflation data for July to gain more clarity on the Fed’s potential rate cuts.
The CME FedWatch tool indicates a 28.5% chance of a 50-basis points rate cut in September, with the majority leaning towards a 25 bps reduction. San Francisco Fed Bank President Mary Daly has expressed support for a quarter-point cut in September, leaving room for a larger cut if the labor market weakens.
The anticipation of Fed rate cuts has put pressure on the US Dollar and bond yields. The US Dollar Index (DXY) is trending lower, approaching the year-to-date low of 100.53. Meanwhile, 10-year US Treasury yields are near 3.86%, reflecting caution ahead of the US core PCE data release on Friday.
Typically, higher bond yields are negative for non-yielding assets like silver, as they reduce the opportunity cost of holding such investments.
Silver Technical Analysis
After a strong rebound near the August 1 high of $29.16, the silver price is poised to target the July 11 high of $31.75. The upward-sloping 20-day Exponential Moving Average (EMA) around $29.70 suggests further upside potential. The 14-period Relative Strength Index (RSI) is in the bullish range, indicating strong momentum to the upside.
Silver Four-Hour Chart
Silver FAQs
Silver is a precious metal with a long history of being traded by investors. It is often used as a store of value and a medium of exchange. Investors may turn to silver for diversification, intrinsic value, or as a hedge during periods of high inflation. Silver can be bought physically in coins or bars, or traded through Exchange Traded Funds (ETFs) that track its price on global markets.
Factors influencing silver prices include geopolitical instability, economic recessions, interest rates, US Dollar behavior, investment demand, mining supply, and industrial usage in sectors like electronics and solar energy. Silver prices tend to follow gold prices, with the Gold/Silver ratio serving as a gauge for relative valuation between the two metals.
Analysis:
The silver price is facing resistance at the $30 level due to rising US bond yields and expectations of Fed rate cuts. Investors should monitor the US core PCE inflation data for July to gauge the Fed’s policy direction. A potential rate cut could weaken the US Dollar and support silver prices. Technical indicators suggest further upside for silver, with a target of $31.75 in the near term.