Silver Prices Forecast: Fed’s Actions Set the Tone in 2024

NEW YORK (December 29) Silver (XAG/USD) prices are poised to end 2023 where they began, despite factors like expected U.S. interest rate cuts and global tensions. The year brought volatility but no breakout for silver.

As 2024 approaches, all eyes are on the Federal Reserve’s moves and the possibility of lower rates. Market sentiment remains uncertain, with questions about the timing and effectiveness of rate cuts to stave off a U.S. recession.

While the CME FedWatch tool indicates expectations of a rate cut in March, jobless claims data shows mixed signals. Some believe the recession forecast is losing steam, considering faster-than-expected inflation declines.

Rate Cut Expectations Impact Silver

Expectations of U.S. Federal Reserve rate cuts have solidified, with an 88% chance of policy easing in March, reducing the opportunity cost of holding non-yielding silver. Meanwhile, the U.S. dollar is poised for its worst yearly performance in three years, enhancing silver’s appeal to holders of other currencies.

Dollar Weakens as Rate Hike Cycle Ends

The U.S. dollar’s performance is changing course, driven by expectations of Fed rate cuts after the central bank’s rate-hike cycle in 2022. Economic data indicating cooling inflation has shifted investor focus to the Fed’s potential rate-cut timeline. A weaker dollar boosts silver’s attractiveness, as it’s set to end 2023 with a loss.

Short-Term Outlook:  Vulnerable to Downside Risks

Silver enters 2024 with a cautious approach, accompanied by concerns over credit market refinancing risks. Should these risks push the Fed to implement stimulus measures swiftly, it could drive silver prices higher. This overview encompasses the current state of silver prices, the impact of rate cut expectations, the weakening U.S. dollar, and potential future challenges. The outlook for silver appears cautiously bullish, contingent on the Federal Reserve’s actions and market stability in 2024.

FXStreet