Silver Price Forecast: XAG/USD slides to near $37 ahead of FOMC minutes, Jackson Hole Symposium
- Silver price declines to near $37.00 amid speculation that Fed’s Powell would support keeping interest rates steady at JH Symposium.
- Investors expect the Fed to cut interest rates in the September meeting.
- Silver price trades inside the Descending Triangle formation on a daily timeframe.
Silver price (XAG/USD) trades 0.6% lower to near $37.00 during the European trading session on Wednesday. The white metal faces selling pressure as investors expect Federal Reserve (Fed) Chair Jerome Powell to reiterate a restrictive monetary policy guidance in his speech at the Jackson Hole (JH) Symposium on Friday.
In the July policy meeting, Jerome Powell guided a “wait and see” approach amid a lack of clarity over the likely consequences of tariffs on inflation and the economy.
"Given the relatively high bar for Powell to meet, there’s a bit of risk being baked into the markets that he leans to the hawkish side and the proverbial rug gets pulled from beneath investors," analysts at Capital.com said, Reuters reported.
The maintenance of a restrictive monetary policy stance by the Fed bodes poorly for non-yielding assets, such as Silver.
Meanwhile, traders see an almost 85% chance that the Fed will cut interest rates in the September meeting, according to the CME FedWatch tool.
In Wednesday’s session, investors will focus on Federal Open Market Committee (FOMC) minutes of the July meeting, which will be published at 12:30 GMT. In the July meeting, the Fed left interest rates unchanged in the range of 4.25%-4.50%.
Silver technical analysis
Silver price slumps to near $37.00 on Wednesday. The white metal demonstrates a sharp contraction in volatility due to the Descending Triangle formation on a daily timeframe. The horizontal support of the above-mentioned chart pattern is plotted from the July 7 low around $36.16, while the downward-sloping border is placed from the July 23 high near $39.53.
The asset slides below the 20-day Exponential Moving Average (EMA), which trades around $37.77, suggesting that the near-term trend has become uncertain.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating indecisiveness among market participants.
Looking down, the June 24 low of $35.28 will act as key support for the major. On the upside, the July 23 high near $39.53 will be a critical hurdle for the pair.
Silver daily chart
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.