Silver Price Prediction: has XAG/USD reached its short-term bottom?

Silver price is trading below the critical support level of $23.50 for the first time in about a week as the market prices in more interest rate hikes over the course of the year.

Fed’s interest rate decision

Analysts’ baseline forecast was for four hikes, to be executed in March, June, September, and December. Besides, markets were expected to react sparingly to the decision as real rates remain negative despite the higher interest rates.

The Fed’s stance in the interest rate decision presented on Wednesday was more hawkish than expected; challenging the analysts’ narrative.

Based on the statement by the US central bank’s Chair – Jerome Powell, one can’t dismiss the probability of a rate hike during every Fed meeting from now on. The hawkish stance has weighed on risk assets like precious metals and equities.

At the same time, the US dollar has surged to a two-month high with the dollar index trading at $96.93. It has skyrocketed from Wednesday’s low of $95.91; boosted further by the higher bond yields. While the benchmark 10-year Treasury yields has pulled backed from the previous session’s high of 1.88%, it has held steady above 1.70% for three weeks now. At the time of writing, it was at 1.83%.

Although silver price will likely remain under pressure in the ensuing sessions, the ongoing inflationary pressure may curb its downward potential. Similar to gold, it is perceived to be a traditional hedge against inflation. Besides, the geopolitical tensions in the Middle East and Eastern Europe will likely boost its demand as a safe haven.

On the data front, the precious metal will react to preliminary data on the US GDP for Q4’21 and core PCE prices. Figures on jobless claims and core durable goods orders are also set for release later on Thursday. Bearish numbers may result in silver price rebounding to the crucial level of $23.50.  

Silver price prediction

Following the Fed’s interest rate decision, silver price has plunged by about 3.25%.Prior to that, it had been range-bound for three sessions in a row. This is the fifth consecutive session that the precious metal is in the red.

On a four-hour chart, it is below the 25 and 50-day exponential moving averages at its current price of 23.15. I expect it to hover around the 200-day EMA at 23.25 as the bulls strive to gather enough momentum to push it back to 23.50.

A move below the day’s low at 23.11 will have the bulls defend the support at the psychological level of 23.00. On the flip side, a rebound past 23.50 may place the resistance zone along the 25-day EMA at 23.69.