Silver prices continued to decline on Friday.
Investors closely monitor economic indicators in order to get a better understanding of possible US interest rate reductions in September. They also keep an eye on the inflation data next week.
Silver has shown resilience despite recent setbacks by maintaining its support above the 200-day moving mean, but traders are still cautious about further downward movement.
Silver’s Trading Range: Navigating key resistance and support levels
The trading activity of silver (XAG/USD), last week, revealed the formation of a range. Buyers respected the 200-day average at $26.11 as a support level and the 50 day moving average at $29.41 as resistance.
This pattern suggests silver could continue to trade in a wide range as the market waits for more definitive economic indicators.
Support is also found at the 50% level of $27.22, whereas resistance is seen at the level of 29.54.
These levels are crucial for traders, as they show where there may be significant buying or sales pressure.
Fed’s rate decision: Balancing market expectations and inflation
Federal Reserve policymakers walk a fine line as they balance the possibility of future rate cuts against a cooling inflation.
According to CME FedWatch Tool the markets currently price in a 55% chance of a rate cut of 50 basis points in September. Another cut is expected in December.
The Fed has stressed that it will base its decisions on economic data and not stock market volatility. It is placing more importance on the upcoming inflation data.
The Fed’s policy direction will be heavily influenced by the Consumer Price Indexes (CPI) next week and Producer Price Indexes (PPI).
These indicators will help to clarify whether the Fed needs to keep its current rate to control inflation pressures, or if it should cut rates.
Silver’s outlook is influenced by the labour market resilience
The recent US data on jobless claims surprised the markets, as it came in better than expected. This alleviated concerns about a possible weakness in labour market.
The Fed’s decision making process is further complicated by the resilience of the labour market, since strong employment numbers could reduce the urgency to cut rates.
The interplay between the Fed’s policy and economic data is of particular importance for silver.
If the Fed decides to cut rates, this could lead to lower bond yields and a weaker US Dollar, which would both support higher silver prices.
Silver could also face further pressure if the Fed continues to maintain its current stance.
Silver’s Potential: A cautiously positive outlook
Silver’s long-term prospects remain cautiously positive despite the current downward trend. Silver is well positioned to gain from multiple scenarios including an increase in risk aversion and expectations of looser monetary policies.
If inflation falls and the Fed continues to cut rates, investors may seek out safe-haven investments.
Silver’s dual role of industrial and precious metal is also a strong support.
Silver’s safe-haven status could be beneficial in the event of a downturn.
If the economy is strong, then industrial demand for gold could drive up prices.
This post Will silver price rise next week as the markets look at inflation data may be updated as new developments unfold.
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