Silver Price Slumps Amid Dollar Recovery
- Traders Divided on Fed Interest Rate Cut
- Focus on US Preliminary PMI Data
In Monday’s European session, the price of silver (XAG/USD) faces downward pressure, dropping near $30.50 after a strong recovery in the US Dollar. Despite market expectations for the Federal Reserve (Fed) to implement another interest rate cut of 50 basis points (bps), the greenback’s surge has made investing in precious metals like silver more expensive.
The US Dollar Index (DXY) has risen by 0.4% above 101.00, influencing the price of silver. This increase in the value of the Greenback has led to a decrease in demand for silver as an investment option.
Traders are split on the likelihood of the Fed reducing interest rates by 50 bps to 4.25%-4.50% in November. While market sentiment leans towards a 75-bps rate cut for the rest of the year, Fed policymakers project the federal fund rate to reach 4.4% by year-end.
Investors will be closely watching the release of the US preliminary S&P Global Purchasing Managers’ Index (PMI) data for September at 13:45 GMT. Analysts predict an improvement in the Manufacturing PMI to 48.5 from 47.9 in August, with a value below 50 indicating a contraction. The Services PMI is expected to show slower expansion to 53.5 from the previous release of 53.7.
Silver Technical Analysis
On a four-hour timeframe, the silver price is trading in a Rising Channel chart formation with strong resistance at the $31.00 level. Market participants see each pullback as a buying opportunity, indicating a continued upside bias.
Currently near the 50-period Exponential Moving Average (EMA) at $30.36, silver shows signs of uncertainty. However, the overall trend remains bullish.
The 14-period Relative Strength Index (RSI) fluctuates between 40.00 and 60.00, suggesting a weakening momentum for silver.
Silver Four-Hour Chart
Silver FAQs
Here are some frequently asked questions about silver:
What Is Silver?
Silver is a precious metal commonly traded among investors. It has been historically used as a store of value and a medium of exchange. Traders often turn to silver to diversify their investment portfolios, as it holds intrinsic value and can serve as a hedge during periods of high inflation.
What Factors Influence Silver Prices?
Silver prices can be influenced by various factors, including geopolitical instability, economic recessions, interest rates, the US Dollar’s performance, investment demand, mining supply, and recycling rates. These factors can cause silver prices to fluctuate in the market.
How Is Silver Used in Industry?
Silver is widely utilized in industries such as electronics and solar energy due to its high electrical conductivity. Changes in demand from these sectors, as well as economic dynamics in countries like the US, China, and India, can affect the price of silver in the market.
How Does Silver Relate to Gold?
Silver prices often follow the movement of gold prices, as both metals are considered safe-haven assets. The Gold/Silver ratio can be used to assess the relative value of silver compared to gold, providing insights for investors on market trends.
Analysis
The price of silver is currently facing downward pressure due to the strengthening US Dollar and uncertain market sentiment regarding Fed interest rate cuts. Investors are closely monitoring economic data releases, such as the US preliminary PMI data, to gauge the health of the economy and potential impacts on silver prices.
Technical analysis suggests that silver is trading within a bullish trend, with resistance at $31.00. The RSI indicates weakening momentum, but the overall bias remains positive for silver prices.
Understanding the factors influencing silver prices and its relationship with gold can help investors make informed decisions about including silver in their portfolios. Keeping an eye on market developments and economic indicators will be crucial for navigating the volatility in the precious metals market.