Silver price prediction: Outlook after the Fed rate decision

Silver price drifted upwards after the Federal Reserve delivered its July interest rate decision. The metal jumped to a high of $25, which was higher than this month’s low of $22.17. Other metals like gold and platinum remained in a tight range after the decision.

Federal Reserve decision

The biggest economic news this week was the interest rate decision by the Federal Reserve. In it, the bank did what most analysts were expecting. It decided to hike interest rates by 0.25% after pausing in June. As a result, rates rose to between 5.25% and 5.50%, the highest level since 2001.

The Fed did not change the language of the accompanying statement. As such, the officials reiterated that the battle against inflation was yet to be won and that it stands ready to hike rates if interest rates remain high.

Still, I believe that the bank has now completed hiking interest rates since inflation is falling at a faster pace than expected. The headline consumer price index (CPI) dropped to 3.0% in June from a peak of 9.1% in 2021. Core inflation also dropped to 4.8%. In a note, an analyst at Citadel Securities said:

“For this last part of the tightening cycle, it makes sense to stretch it out over time. They are fine-tuning. They don’t know the exact destination. It makes sense to do that slowly.”

Silver, like other precious metals, pays a close attention to the actions of the Federal Reserve. In most cases, silver tends to rise when the Fed sounds dovish and vice versa.

There were other catalysts for silver prices this week. For example, China unveiled a series of stimulus packages to boost the struggling economy. At the same time, the IMF upgraded the economic outlook.

Silver price forecast

The daily chart shows that silver price has drifted upwards this week. It has now moved slightly above the important resistance level at $24.55, the highest point on January 11th. Silver has jumped above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved slightly below the overbought level.

The outlook for silver is bullish, with the next key level to watch will be at $26.05, the highest level on May 5th. A move below the support at $24.50 will invalidate the bullish view.