Silver Price Forecast: XAG/USD struggles near $75.50 on firm hopes of Fed’s extended pause
- Silver price trades vulnerably near $75.50 as traders expect an extended pause from the Fed.
- The Fed sees monetary policy adjustments as unviable until inflation starts to cool down.
- Middle East conflicts are expected to limit the downside in the Silver price.
Silver price (XAG/USD) struggles to gain ground even after sliding to a fresh monthly low of $75.50 during the late Asian trading session on Thursday. The white metal has come under pressure amid the speculation that the Federal Reserve (Fed) will hold interest rates steady in the current range of 3.50%-3.75% in the entire year.
According to the CME FedWatch tool, the collective odds of the Fed leaving the Federal Fund Rate unchanged and hiking it from its current levels are 57.5%.
The scenario of the Fed holding interest rates at their current levels for longer is theoretically favorable for interest-bearing assets, which eventually diminishes the appeal of non-yielding assets, such as Silver.
As of writing, 10-year US Treasury Yields are 0.42% up to near 4.28%, close to their over six-week high. The US Dollar Index (DXY) is marginally down, but is holding onto Wednesday's gains slightly above 100.00.
Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
Speculation that the Fed will hold interest rates for a longer period intensified after the Fed’s monetary policy outcome on Wednesday, in which it left interest rates unchanged for the second time in a row, as expected, and signaled that monetary easing is not feasible as risks to inflation are skewed to the upside.
“Inflation remains somewhat elevated, with recent progress slower than hoped,” Fed Chair Jerome Powell said in the press conference and added, “The current policy stance is appropriate and is at the high end of neutral, or mildly restrictive.”
Meanwhile, escalating tensions in the Middle East are expected to limit the downside in the Silver price. Safe-haven assets, such as Silver, tends to perform better in a heightened geopolitically uncertain environment.
Silver technical analysis
In the 4-hour chart, XAG/USD seems to be in a bearish trend after a breakdown of the Descending Triangle chart pattern near $77.50. The shift of the 14-period Relative Strength Index (RSI) into the 20.00-40.00 zone signals the onset of a strong bearish momentum.
Key support areas emerge at the February 17 low around $72.00 and the February 06 low of $64.17, respectively. On the upside, Initial resistance emerges at the recent breakdown zone around $78.00, followed by the $80.00 area where prior lows and the rejected trend-line region converge. A recovery above $80.00 would be needed to ease immediate downside pressure and open the way toward the March 12 high of $87.45.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
