Market Overview
Silver prices (XAG/USD) struggled to maintain the previous day’s gains, slipping to around $27.79 and reaching an intraday low of $27.63. This decline is largely due to improved risk sentiment and market adjustments ahead of key U.S. inflation data, which typically reduces the demand for safe-haven assets like silver.
However, escalating geopolitical tensions in the Middle East and fears of a broader regional conflict may provide some support, potentially limiting further declines.
Additionally, dovish expectations for the Federal Reserve (Fed) are likely to bolster silver prices, as they weigh on U.S. dollar strength.
Silver Prices Rise on Fed Rate Cut Expectations and Weakening U.S. Dollar
The broad-based U.S. dollar reversed its upward trend, turning bearish as dovish Federal Reserve (Fed) expectations weighed on dollar strength, providing a boost to silver prices. Anticipation of a 50 basis points rate cut by the Fed in September is further supporting silver’s gains.
Looking ahead, U.S. inflation data, including the Producer Price Index (PPI) on Tuesday and the Consumer Price Index (CPI) on Wednesday, are expected to show cooling inflation for July, potentially allowing the Fed to ease its policy.
However, if CPI readings exceed expectations, it could dampen hopes for significant Fed rate cuts, potentially pressuring silver prices.
Rising Geopolitical Tensions Fuel Increased Demand for Safe-Haven Silver
Escalating tensions in the Middle East are dampening market optimism and boosting demand for safe-haven assets like silver. Israel has intensified operations near Khan Younis in southern Gaza, raising concerns about a broader regional conflict.
Additionally, Israel is preparing for potential retaliation from Iran and Hezbollah after the assassination of Hamas leader Ismail Haniyeh in Tehran. Meanwhile, Russian President Vladimir Putin has issued a stern warning to Ukraine following its recent cross-border incursion into the Kursk region.
These developments are heightening geopolitical uncertainty, increasing support for silver prices.
Short-Term Forecast
Silver (XAG/USD) Price Forecast: Technical Outlook
Silver (XAG/USD) is currently trading at $27.79, down 0.79%. On the 4-hour chart, silver consolidates near this level, with a strong resistance of around $27.96. While it has crossed above the 50-day EMA at $27.70, indicating some bullish momentum, further upward movement will depend on breaking through the resistance at $28 that’s being extended by a downward trendline.
If silver can surpass this level, the bullish trend could continue. However, if it fails to break above $27.96, we could see a selling trend develop. The key level to watch is $28; above it, buying pressure may increase, while below it, bearish momentum could take hold.
Silver remains bearish below $27.96, but if prices break above this level, the bias could shift to bullish.