Silver Price Forecast: XAG/USD dives below the 20/50-DMAs, below $20.00

Silver price slides, extending its losses to five consecutive days, amidst an upbeat market mood, late in the Wall Street close, which weighed on the non-yielding metal. Additionally, broad US dollar strength kept the white metal prices pressured as a reaction to Fed officials reiterating the need to bring inflation down, while US jobs data further cemented the case for a September rate hike.

The XAG/USD is trading at $19.50, slightly down, after hitting on Thursday a daily high of $19.93.

Wall Street finished with solid gains amidst thin liquidity trading. The US Department of Labour reported that claims for unemployment in the week ending on August 13 slid less than estimations, while the housing market showed signs of cooling down. Existing Home Sales for July decreased by 5.9%, the lowest since May 2020.

Regarding Fed commentary, San Francisco’s Mary Daly said it is too early to declare victory on inflation and backed a 50 or 75 bps hike for September. Esther George of the Kansas City Fed added that core inflation is “hardly comforting” and that further rate hikes are coming.

Late in the day, the St. Louis Fed uber-hawk James Bullard commented that he’s leaning towards a 75 bps rate hike in September, while Minnesota Fed’s Neil Kashkari said there’s more work to be done while adding that he’s not sure if the Fed can avoid a recession.

Even though Kashkara acknowledged that he’s unsure about reaching the Fed’s goal without a recession, most officials remain laser-focused on tackling inflation. Meaning, that further rate hikes are expected for the rest of 2022 and probably the first half of 2023.

In the meantime, money market futures STIRs, have fully priced a 50 bps hike in September. But odds of a 75 bps increase are up at 78%, after tumbling towards 50% on Wednesday, following the release of July’s FOMC minutes.

Aside from this, the US Dolar Index, a measure of the greenback’s value against a basket of peers, reached three-week highs, gaining 0.77%, up at 107.492, a headwind for precious metals prices. On the contrary, most US Treasury bond yields, led by the 10-year benchmark note rate, edged down two basis points, at 2.886%.

That said, XAG/USD prices would remain downward pressured, due to the US Federal Reserve tightening cycle. If the US central bank can achieve a “soft” landing, silver traders should expect further selling pressure stepping in. Contrarily, if US economic growth decelerates and causes a recession, safe-haven flows could benefit the white metal.

Silver (XAG/USD) Key Technical Levels