- In the countdown to Fed Chairman Powell’s speech, the price of silver rises to almost USD 29.30.
- Jerome Powell is expected to provide new guidance on interest rates and the economic outlook.
- Due to the firm prospect of a Fed rate cut, US bond yields remain under pressure.
Silver (XAG/USD) prices are rising to nearly $29.30 in Friday’s North American session, with investors focused on U.S. Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole (JH) Symposium. The white metal is gaining as bond yields are falling on expectations that Jerome Powell will issue a dovish interest rate forecast.
Yields on 10-year US Treasury notes are falling to nearly 3.84%. Lower yields on interest-bearing assets do not bode well for non-yielding assets like silver, as they reduce the opportunity cost of investing in those assets.
The US dollar index (DXY), which tracks the greenback’s value against six major currencies, is recovering its intraday losses and recovering to nearly 101.50.
Market participants are optimistic about Powell’s dovish forecast, but want more clarity on the likely magnitude of September rate cuts. According to the CME FedWatch tool, 30-day federal funds futures price data shows that the probability of a 50 basis point (bp) rate cut in September is 28.5%. The rest, however, favor a 25 bp rate cut.
Investors will also be paying attention to Powell’s speech to know whether the chances of a “soft landing” are intact. Market experts began to expect a possible recession in the United States (US) after the Nonfarm Payrolls (NFP) report for July indicated a sharp decline in labor demand and a rise in the unemployment rate to 4.3%, the highest level since November 2021.
Technical Analysis of Silver
Silver price is turning sideways after breaking the August 2 high at $29.20, which faltered the formation of a lower high and lower low on a four-hour timeframe. The 200-period exponential moving average (EMA) at $28.77 is acting as a buffer for the 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.
