Silver Price Prediction: $54 Test Ahead as Fed Dovish Shift Lifts XAG Momentum
Silver continued its recovery on Thursday, echoing the broader precious metals market, as investors increasingly believe...
Quick overview
- Silver is recovering alongside the precious metals market as investors anticipate a potential Federal Reserve policy easing in December.
- The likelihood of a 25-basis-point rate cut has surged to 80%, boosting Silver prices while the US dollar weakens.
- Despite a slight dip in Gold, Silver remains attractive to buyers due to its strong technical position and historical performance during rate cuts.
- Recent mixed US economic data and improved diplomatic relations have shifted market focus from safety to opportunity, benefiting Silver.
Silver continued its recovery on Thursday, echoing the broader precious metals market, as investors increasingly believe the Federal Reserve will start easing up on policy in December. The turnaround came after a bit of a rough patch for US labour data and some cautious comments from senior Fed officials which has seen bets on rate-cuts shoot up to their highest in weeks.
Markets are now really pricing in an 80% chance of a 25-basis-point cut thanks to the CME FedWatch tool – a big jump from just 30% a few weeks back. As a result the US dollar slipped to a week low, which is good news for metals. While Gold dipped slightly as risk appetite increased, Silver kept attracting buyers because it was in a strong technical position and tends to outperform when we see rate cuts early on.
Investors are also keeping an eye on global politics right now. As hopes for renewed diplomatic progress grow, immediate safe-haven demand has gone down a bit, but not enough to stop expectations of lower US borrowing costs from helping out.
Why this matters
- Rate cuts make real interest rates go down – which is a key driver for Silver.
- Soft labour data has reinforced the Fed’s hint at an easing bias.
- An improved diplomatic tone has shifted the market from safety to opportunity.
[[XAG/USD-graph]]
U.S. Data Continues to Weaken the Dollar
US numbers have been a bit mixed but we’re definitely seeing a slowdown. Durable Goods Orders rose 0.5% in September and jobless claims fell to a seven month low – which is good. But then the Chicago PMI fell further into contraction at 36.3 which is a sign the economy is losing steam. As traders are more focused on what the Fed will do next than about the state of the US economy right now, the dollar has had a hard time building momentum – which has indirectly helped Silver prices to rise.
Silver Technical Outlook: We’re Starting to See a Breakout
Silver has broken through the key $52.73 resistance level and is now up against the upper end of its range near $53.45. The series of higher lows since late November shows we are starting to see renewed buying interest in Silver, a string of closes above the 20-day EMA further confirms the good news – it looks like short term momentum is picking up. The RSI is at 68 showing a lot of demand still without any signs of it being overdone.
If Silver can stay above $53.45 then its next target is $54.42 – a level it fell short of in previous rallies. But if it can’t hold above $52.73 then a drop back to $51.73 could be on the cards – as that’s where a trend line and the 20-day EMA meet up, creating a solid floor.
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