Silver Price Rallies Above $31.00 Following Fed’s Policy Announcement
- The Fed Cut Interest Rates by 50 bps to 4.75%-5.00%
- Fed’s Bumper Interest Rate Cut Signals Return to 2% Inflation Target
The silver price (XAG/USD) has surged above the critical resistance level of $31.00 in Thursday’s European session. This rally comes as the US Dollar (USD) weakens after the Federal Reserve’s (Fed) announcement of a historic interest rate cut, the first in over four years.
Lower interest rates by the Fed typically benefit non-yielding assets like silver, as they reduce the opportunity cost of holding such investments. This has led to the strengthening of silver prices as the US Dollar falters in the aftermath of the Fed’s policy decision.
The US Dollar Index (DXY), which measures the Greenback’s value against major currencies, has dropped to around 100.60 following the Fed’s 50-basis points interest rate cut to 4.75%-5.00%. The Fed’s decisive rate cut indicates that inflation is on track to reach the bank’s target of 2%.
Interest Rate Outlook and Market Expectations
The Fed projects the federal fund rate to decline to 4.4% by year-end, suggesting further interest rate cuts of at least 25 bps. However, market expectations, as indicated by the CME FedWatch tool, anticipate a total reduction of 75 bps in future monetary policies this year.
Silver Technical Analysis
The breakout of the downward-sloping trendline from the May 20 high of $32.50 has bolstered silver prices, signaling a potential move towards the previous high. The upward-sloping 20-day Exponential Moving Average (EMA) near $29.50 indicates a positive near-term outlook for silver.
The 14-day Relative Strength Index (RSI) is above 60.00, suggesting the possibility of further bullish momentum if the oscillator maintains this level.
Silver Daily Chart
Silver Frequently Asked Questions
- What is Silver?
- What Factors Influence Silver Prices?
- How is Silver Used in Industry?
- How Does Silver Relate to Gold?
Silver is a precious metal commonly traded among investors, used for its value and as a hedge during high-inflation periods. Investors can buy physical silver or trade it through Exchange Traded Funds.
Silver prices can be affected by geopolitical instability, interest rates, USD performance, investment demand, supply, and economic dynamics in key markets like the US, China, and India.
Silver is widely used in electronics and solar energy due to its high electric conductivity. Demand in these sectors can impact silver prices.
Silver prices often follow gold’s movements, influenced by the Gold/Silver ratio, which indicates the relative valuation between the two metals.