Silver Price Forecast: XAG/USD drops sharply below the $18.50 mark on Fed’s aggressive tightening

Silver price edges lower, hitting six-week lows below the $18.50 mark, extending its losses for three consecutive days, amidst a sour market sentiment spurred by expectations of a hawkish Fed, according to Powell’s speech at Jackson Hole. Echoing the same remarks are ECB’s Governing Council members, adding to a worldwide hawkish choir where higher rates, and high inflation, could trigger a recession.

XAG/USD git a daily high, near $18.84, but broad US dollar strength, spurred by three Fed regional bank presidents, alongside renewed China’s Covid-19 lockdowns, weighed on the white metal. Therefore, tXAG/USD tumbled towards the day’s lows at $18.32 before settling around current prices. At the time of writing, XAG/USD is trading at $18.40, down almost 1.70%.

XAG/USD stumbles on positive US consumer confidence, sour sentiment

During the New York session, the US Conference Board revealed that consumer confidence in the US was better than estimated. August’s figures came at 103.2, topping expectations of 98. At the same time, the US Department of Labor reported that job openings on the JOLTs Openings report rose by 11.2 million, exceeding all the forecasts, while quits diminished.

Aside from this, three Fed officials stressed the need for the US central bank to hike rates into restrictive territory. The New York Fed Williams expressed the need to increase rates beyond the 3.5% threshold, adding that once rates peak, they will need to stay higher for longer. Later, Richmond’s Fed Barkin expressed that the Fed’s goal is 2% and reiterated the Fed will “do what it takes to get there.”

Earlier, Atlanta’s Fed Bostic wrote that the Fed’s duty to curb inflation is “unshakable” while adding that he would be open to lower rate hikes.

On the ECB’s side, most Governing Council members, seven crossing newswires, expressed the need to front-load rates, some expecting a 75 bps rate hike, while others a 50. Some of the speakers said that the Euro area would enter a recession.

Aside from this, market participants’ focus turns to the US economic calendar. The docket will feature the US ISM Manufacturing PMI for September, alongside the US Nonfarm Payrolls report, which would shed some light on the employment situation.

XAG/USD Key Technical Levels