Silver (XAG/USD) commenced the week with a downtrend, currently trading around $28.08 after touching an intraday low of $28.06. This decline is attributed to hawkish statements from the Federal Reserve (Fed) and growing speculations that the Fed might delay its easing measures, strengthening the US dollar and consequently pressuring silver prices downwards.
Market sentiment, influenced by positive factors, has also contributed to the reduction in silver prices. However, ongoing geopolitical tensions in the Middle East are expected to provide some support to silver, potentially limiting further declines.
Federal Reserve’s Policy Outlook
The US Federal Reserve’s firm stance, as articulated by various Fed officials, has bolstered the US dollar and exerted downward pressure on silver prices. Remarks from San Francisco Fed President Daly emphasized the need for continued restrictive policies to meet inflation targets. Meanwhile, Atlanta Fed President Bostic hinted at potential interest rate cuts this year despite existing uncertainties, contrasting with Dallas Fed President Logan’s concerns about inflation risks and Minneapolis Fed President Kashkari’s cautious approach towards rate hikes.
Recent Economic Data and Market Sentiment
Recent economic data, notably the University of Michigan Consumer Sentiment Index for May, which dropped to 67.4 from 77.2 in April, coupled with rising consumer inflation expectations, have influenced market sentiment. These factors, along with the Fed’s stance, have supported the US dollar and weighed on silver prices.
Geopolitical Tensions in the Middle East
Geopolitical developments in the Middle East, particularly the Israeli military operations in Gaza, have temporarily boosted precious metal prices including silver. Ongoing conflicts and heightened uncertainty in the region tend to drive investors towards safe-haven assets like precious metals.
Silver (XAG/USD) Price Forecast and Technical Analysis
Currently trading at $28.08 with a slight decline of 0.48%, silver is in a consolidation phase above the pivotal $28.23 mark. Immediate resistance levels are seen at $28.79, followed by $29.24 and $29.64. On the downside, key support levels are $27.91, $27.58, and $27.19.
The 50-Day and 200-Day Exponential Moving Averages, positioned at $27.38 and $26.81 respectively, reflect a bullish sentiment in the market above the critical threshold of $28.23. However, a breach below this level could trigger a notable sell-off in silver prices.
