Usman Salis
Silver (XAG/USD) drops to near $31.31 despite a weakening US Dollar, as investors await Federal Reserve Chair Jerome Powell's speech for interest rate guidance.
XAG/USD Faces Decline Amid Fed Expectations
Silver (XAG/USD) experienced a sharp decline during Monday’s European session, with the price nearing $31.31. Despite the US Dollar (USD) slipping to yearly lows, Silver remains under pressure. Investors are eagerly awaiting Federal Reserve (Fed) Chair Jerome Powell's speech, scheduled for 17:00 GMT, which is anticipated to provide new interest rate guidance.
The US Dollar Index (DXY), which measures the Greenback against six major currencies, sits near 100.20, signaling vulnerability. Meanwhile, the 10-year US Treasury yields climbed to approximately 3.77%. Rising yields on interest-bearing assets like Treasury bonds have heightened the opportunity cost of holding non-yielding assets such as Silver, further weighing on XAG/USD’s performance.
Fed Powell's Speech Critical for XAG/USD Investors
All eyes are on Powell's speech, with the market anticipating potential insight into future interest rate moves. Market participants are speculating whether the Fed will opt for a 50 basis point (bps) rate cut in November, a larger-than-usual reduction. The CME FedWatch tool shows traders nearly evenly split between a 25 bps or 50 bps cut.
According to the tool, there's also a broader expectation that the Fed will reduce interest rates by a cumulative 75 bps over the remainder of 2024, driving speculation in both currency and precious metals markets, including Silver.
Key US Data Could Impact XAG/USD
This week, investors are closely monitoring upcoming US economic data, which could influence XAG/USD. Notable reports include the August JOLTS Job Openings, the ADP Employment Change, and September’s Nonfarm Payrolls (NFP). These economic indicators will offer insight into the US labor market’s health, potentially swaying Federal Reserve policy and, in turn, the Silver market.
From a technical perspective, Silver has struggled to maintain its upward momentum above the horizontal resistance at $32.50, drawn from the May 21 high. The near-term outlook for XAG/USD remains cautiously optimistic, with the 20-day Exponential Moving Average (EMA) at $30.55 sloping upwards.
Moreover, the 14-day Relative Strength Index (RSI) remains in the bullish range of 60.00-80.00, signaling that Silver’s bullish momentum could continue, though some volatility is likely in the near term as markets digest Fed guidance and economic data.
Usman Salis
