Silver Price Forecast: XAG/USD surges above $40 as Fed seems to cut interest rates in September
LONDON (August 1) Silver price (XAG/USD) posts a fresh 14-year high around $40.70 during the European trading session on Monday. The white metal strengthens as traders are confident that the Federal Reserve (Fed) will cut interest rates in the policy meeting in September.
According to the CME FedWatch tool, there is an 87.6% chance that the Fed will cut interest rates in the policy meeting this month.
Theoretically, lower interest rates by the Fed bode well for non-yielding assets, such as Silver.
On Friday, San Francisco Fed President Mary Daly signaled that officials will reduce interest rates in the policy meeting this month, citing escalated labor market risks. Daly also stated that the tariff-driven inflation will likely be temporary.
“Tariffs are pushing inflation higher and the labor market is slowing, Daly said and added, “I think tariff-related price increases will be a one-off.”
Meanwhile, weakness in the US Dollar (USD) due to growing concerns over the credibility of the US economic policies has also contributed to strength in the Silver. During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.2% lower near the monthly low around 97.60.
A panel of judges stated on Friday that US President Trump has exceeded his authority to fulfil his tariff agenda, citing them as “illegal” and accused him for wrongfully invoking emergency law.
Silver technical analysis
Silver price jumps to near $40.70 after a breakout above the previous high of $39.53 recorded on July 23. The near-term trend of the Silver price is bullish as the 20-day Exponential Moving Average (EMA) slopes higher around $38.60.
The 14-day Relative Strength Index (RSI) jumps to near 70.00, suggesting that a fresh bullish momentum has been triggered.
Looking down, the July 23 high around $39.53 will act as key support for the major. On the upside, the pair has entered an uncharted territory and could extend its upside to the August 2011 high around $44.24.
FXStreet
