Silver price forecast with the Fed interest rate decision in the horizon

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on May 1, 2022
  • Silver price has been on a downtrend over the past two weeks amid a strengthening US dollar.
  • Investors are keen on the Fed interest rate decision set for release on 4th May.
  • The precious metal will also be reacting to the US nonfarm payrolls and JOLTs job openings.

Silver price is beginning the new week on a downtrend amid heightened prospects of aggressive interest rate hikes by the Federal Reserve. Indeed, all eyes are on the Fed interest rate decision scheduled for release on 4th May.

silver price
silver price

Drivers for the new week

The financial markets have priced in a rate hike of 50 basis points as the US central bank strives to ease the inflation that is currently at a four-decade high. However, in the course of the year, investors expect even more tightening of the Fed policy. Notably, an environment of higher interest rates tends to weigh on precious metals while strengthening the US dollar.

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Indeed, the greenback has been on an uptrend for close to three months. In particular, the psychological level of $100 has been a steady support zone of the dollar index since mid-April. Prior to that, it had been an evasive zone since May 2020. It ended Friday’s session at $103.21. The rising Treasury yields have also increased the opportunity cost of holding the non-yielding asset.

In addition to the Fed meeting, investors will also be keen on the JOLTs job openings on Tuesday and nonfarm payrolls on Friday. Besides, based on its status as both an industrial and precious metal, silver price will be reacting to the ISM manufacturing PMI scheduled for release on Monday.

Silver price forecast

Over the past two weeks, silver price has been on a decline; dropping by about 12.48%. In fact, since the Russia-Ukraine war began in late February, last week marked the first time that the precious metal dropped below the steady support of 24.00. It ended the week at 22.74; its lowest level since 7th February.

On a daily chart, it is trading below the 25 and 50-day exponential moving averages. Besides, it is in the oversold territory with an RSI of 26. Based on these technical indicators, coupled with the fundamentals, I expect the downtrend to continue into the new week.

Silver price will likely hover around 22.76 as the market enters the new week as the bulls try to retest the psychological level of 23.00. It may record a corrective rebound to find resistance at 23.14 before declining further. On the lower side, 22.24 and the lower level of 21.85 will be support levels to look out for.

silver price
silver price
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