- Silver prices are trading sideways below $30.00 with the FOMC minutes in focus.
- The US dollar and bond yields remain on a bearish trajectory amid optimism about a Fed rate cut.
- Fed Powell’s speech at the JH Symposium will be the key event this week.
Silver price (XAG/USD) is trading in a tight range below the psychological resistance level of $30.00, with investors focusing on the July Federal Open Market Committee (FOMC) monetary policy minutes due to be released at 18:00 GMT.
Investors are eagerly awaiting the release of the FOMC minutes, as they will provide new clues about the path of interest rates this year. At the July meeting, the Fed left interest rates unchanged in the range of 5.25% to 5.50%, but assured that policymakers are ready to adjust the monetary policy stance if risks emerge that could delay the banks’ achievement of goals, such as 2% inflation while maintaining full employment.
Ahead of the FOMC minutes, the US dollar (USD) is showing a subdued performance, remaining near its seven-month low. The US dollar index (DXY), which tracks the greenback’s value against six major currencies, is hovering at 101.40. 10-year US Treasury yields are falling to nearly 3.80%. Lower yields on interest-bearing assets are reducing the opportunity cost of investing in non-yielding assets like silver.
This week, the US dollar is expected to remain volatile as Fed Chairman Jerome Powell is scheduled to speak at the Jackson Hole (JH) Symposium on Friday. Fed Chairman Powell will hint at how much the central bank might cut interest rates this year.
Technical Analysis of Silver
Silver price is witnessing a bullish trend reversal as a decisive break above the August 2 high of $29.20 has stalled the formation of a lower high and lower low on a four-hour time frame. An upsloping 20-period exponential moving average (EMA) near $29.20 is likely to act as a buffer for silver price bulls.
The Relative Strength Index (RSI) for the last 14 periods is falling to almost 60.00, which suggests that the upside momentum has ended for now. However, the bullish bias remains intact.
Silver four-hour chart
Frequently asked questions about silver
Silver is a precious metal that is widely traded among investors. It has historically been used as a store of value and a medium of exchange. Although it is less popular than gold, traders can turn to silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge in times of high inflation. Investors can buy physical silver in coins or bars, or trade it through instruments such as exchange-traded funds that track its price on international markets.
The price of silver can change based on a variety of factors. Geopolitical instability or fear of a severe recession can drive up the price of silver due to its safe-haven status, although to a lesser extent than gold. As a non-yielding investment, silver tends to rise when interest rates are lower. Its movements also depend on how the U.S. dollar (USD) behaves, as the asset is valued in dollars (XAG/USD). A strong dollar tends to keep the price of silver in check, while a weaker dollar is likely to drive prices higher. Other factors such as investment demand, mining supply—silver is much more common than gold—and recycling rates can also affect prices.
Silver is widely used in industry, especially in areas such as electronics or solar energy, because it has one of the highest electrical conductivities of any metal – higher than copper and gold. A surge in demand can raise prices, while a decline tends to lower them. The dynamics of the US, Chinese and Indian economies can also contribute to price fluctuations: in the US and especially in China, silver is used in various processes in major industries; in India, consumer demand for the precious metal for jewelry also plays an important role in pricing.
Silver prices tend to follow the movements of gold prices. When gold prices rise, silver usually follows the trend as they share a similar status as safe haven assets. The gold/silver ratio, which indicates the number of ounces of silver required to equal the value of one ounce of gold, can help determine the relative value of both metals. Some investors consider a high ratio to be an indicator that silver is undervalued or gold is overvalued. On the contrary, a low ratio could indicate that gold is undervalued compared to silver.
