Silver Prices Forecast: XAG/USD Turns Lower after Testing Seven-Month Peak

NEW YORK (December 4) Silver (XAG/USD) initially rose to a seven-month high on Monday, influenced by a concurrent surge in gold prices, but those gains have been erased by profit-taking. Gold’s significant rise to a record high was driven by growing expectations of U.S. interest rate cuts next year, despite the Federal Reserve’s efforts to manage such optimism.

Influence of Federal Reserve and Market Reaction

The rally in both silver and gold, starting in early October, gained momentum on Friday following comments from Federal Reserve Chair Jerome Powell about the restrictive nature of current monetary policy. This resulted in a drop in the dollar and Treasury yields, which typically benefits non-interest-bearing assets like silver. However, Powell’s caution against early speculation of rate cuts has led to a more tempered market response.

Market Outlook and Potential Risks

While swaps markets indicate a likelihood of interest rate reductions, the upcoming U.S. labor data poses potential risks. The market is watching closely for signs that could either support a ‘soft-landing’ scenario or suggest stronger economic performance, potentially altering the course of Federal Reserve policy decisions.

Silver’s Price Movement and Future Prospects

Silver’s sharp rise to $25.47 early Monday, following Friday’s gains, has led to suggestions that it might be overbought. The market’s reaction, coupled with uncertainties surrounding Federal Reserve policy, indicates the potential for a short-term pullback in silver prices. The immediate outlook remains cautiously optimistic but is heavily influenced by upcoming economic indicators and market speculation.

FXEmpire