Silver Prices Forecast: Divergent Trends with Gold Amid Market Volatility
LONDON (February 19) In a notable divergence, gold is trading higher on Monday, while silver faces a downturn. This contrast highlights the distinct market behaviors of the two metals at the start of the week.
At 07:58 GMT, XAG/USD is trading $23.10, down $0.32 or -1.36%.
Silver’s Decline and Resistance Levels
Silver is trading sharply lower, unable to break through key resistance levels at its 50-day and 200-day moving averages, situated at $23.12 and $23.31. Despite its resilience last week, silver now encounters challenges at higher levels, particularly between $23.92 and $24.39. If silver falls below $21.88, a steep decline may ensue.
Economic Data Influencing Silver
U.S. economic data, notably inflation and retail sales figures, are shaping silver’s market performance. The Producer Price Index (PPI) for January rose unexpectedly to 0.3%, and the Consumer Price Index (CPI) recorded a higher than forecasted increase. In contrast, January’s retail sales experienced a more significant decline than anticipated, falling by 0.8%.
Treasury Yields and the Dollar Index
The inflation data has led to a rise in Treasury yields, with the 10-year note reaching 4.293% and the 2-year yield climbing to 4.66%. Meanwhile, the dollar index (DXY) continues its upward trend, marking five weeks of consecutive gains.
Federal Reserve’s Rate Cut Expectations
Expectations for the Federal Reserve’s rate cut have shifted from March to June, as indicated by a 73% probability on the CME Fed Watch Tool. This change is a response to the stronger-than-expected economic indicators.
Market Outlook for Silver
Silver’s outlook for the upcoming week is mixed with a cautious tone. While there’s potential for an upward movement, it must overcome significant resistance near $23.92 to $24.39. Rising Treasury yields could, however, prompt a negative adjustment in silver prices, as they increase the appeal of yield-bearing assets. Investors should watch these developments closely, especially considering silver’s current divergence from gold’s upward trend.
Daily Silver (XAG/USD)
Silver (XAG/USD) is trading lower on Monday after hitting its highest level since January 12 the previous session. Currently, the market is straddling the 50-day moving average at $23.12 and the 200-day moving average at $23.31.
Trader reaction to the 50-day MA and the 200-day MA is likely to determine the near-term direction of the silver market. These two levels have held as resistance since January 3. This highlights their significance.
On the upside, while overcoming the moving averages will indicate the presence of buyers, the true breakout point to the upside may be the static resistance at $23.55.
On the downside, a sustained move the 50-day moving average at 23.12 will be a sign of weakness. This will make the market vulnerable to the nearest major support zone at $22.23 – $21.88.
FXEmpire
