Silver Price Analysis: XAG/USD rallied above $24.50 as markets now bet on sooner rate cuts by the Fed

On Tuesday, the Silver Spot Price XAG/USD gained momentum, advancing near the $25.00 area displaying more than 2% gains on the day. The lower JOLTS Job Openings from July opened the upside on the grey metal on the back, declining US treasury bond yields as investors are now pricing in rate cuts by the Federal Reserve (Fed) in June 2024.

In reaction to the lower-than-expected employment data from the US, investors are placing dovish bets on the Federal Reserve (Fed), causing the US yields to decrease. The 2-year yield declined to 4.88%, its lowest in almost three weeks, while the 5- and 10-year yields declined to 4.28% and 4.12%, respectively, showing more than 2% of daily losses. As US yields are the opportunity cost of holding the non-yielding Silver, the grey metal found demand.

As for now, the CME FedWatch Tool suggests that investors are betting on a no-hike in the following September 20 meeting, while the odds of a hike of 25 basis points (bps) stand near 40% for the November meeting. The decline in the US yields may be explained but markets now anticipating rate cuts in June 2024, sooner than the previous expectations of those happening in July.

Focus now shifts to Wednesday’s Gross Domestic Product (GDP) for Q2 and the ADP Employment Change from August, which will help investors model their expectations for the next Fed decisions. 

 XAG/USD Levels to watch 

 Based on the daily chart analysis, a bullish outlook is noted for XAG/USD short term. The Relative Strength Index (RSI) resides above its midline in positive territory with a northward slope, further validated by the green bars on the Moving Average Convergence Divergence (MACD), indicating a robust bullish momentum. Additionally, the pair is above the 20,100,200-day Simple Moving Average (SMA), indicating a favourable position for the bulls in the bigger picture.

 Support levels: $24.30, $23.95 (100-day SMA), $23.30 (200-day SMA)

 Resistance levels:  $24.80, $25.00, $25.10

 XAG/USD Daily Chart