Silver price forecast: steady support may not yield a trend reversal
- Silver price has its losses curbed amid subtle movements in Treasury yields and the US dollar.
- The Fed meeting minutes met investors' expectations of a 50 basis points hike in the June and July meetings.
- Risk-on mood post the FOMC minutes is weighing on the precious metal.
Silver price remains under pressure from the prospects of interest rate hikes by the Fed. Even so, subtle movements by the US dollar and Treasury yields have curbed its losses.
What’s driving the market?
Following the Fed meeting minutes, the bulls have failed to gather enough momentum to break past the resistance zone of $22.00. While the precious metal is a conventional hedge against inflation, an environment of higher interest rates tends to weigh on the non-yielding asset.
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As expected, the minutes pointed to interest rate hikes of 50 basis points in the June and July meetings. After that, the US central bank may wait to see the move’s economic impact. As stated by the Fed Chair in his speech following the Fed’s interest rate decision earlier in the month, FOMC is not actively considering an increase of 75 basis points.
Notably, the Fed minutes did not yield any surprise in the financial markets. This explains why the US dollar was little changed in Friday’s session. As at the time of writing, the dollar index was at $102.10; hovering around $102.00 for the third consecutive session. Similarly, the benchmark 10-year Treasury yields are at 2.71%, which has been its support level over the past three days. The modest moves in the greenback and Treasury yields explains silver price’s curbed losses.
At the same time, the FOMC minutes have boosted the risk sentiment; an aspect that has eased the demand for safe havens – which includes silver and other precious metals. Dow Jones extended its gains to $32,120.29 after dropping below 31,000 for the first time since March 2021 in the past week. S&P 500 has also edged higher at $3,978.74.
The risk-on sentiment is founded on the policy makers’ unanimous opinion that the US economy is very strong. They remain keen on dealing with the inflation that is currently at a 40-year high without triggering a recession. The risk-on mood, coupled with concerns over global economic growth, may continue to weigh on silver price despite hitting its short-term bottom.
Silver price technical analysis
Silver price has edged lower in early Thursday trade as the market digests the Fed meeting minutes released late on Wednesday. As shown on a daily chart, the metal remains below the 25 and 50-day exponential moving averages.
For close to a week now, it has been hovering close to the psychological level of 22.00 with the bulls lacking enough momentum to break that crucial support-turn-resistance zone. As at the time of writing, it was at 21.75.
On the one hand, I expect silver price to remain above 21.00 in the short term based on the hint that the Fed may not get more aggressive in tightening its monetary policy. Even so, 22.00 may remain a crucial resistance level for the remainder of the week.
From this perspective, the range between 21.40 and 22.20 is worth watching. If the bulls manage to push it past the range’s upper border, they may have an opportunity to hit a three-week high at 22.86.