Key Takeaways:
- Silver price is trading below resistance at $31.00 as investors await the Fed’s monetary policy announcement.
- The Fed is expected to cut interest rates by 50 bps, with a 65% probability according to the CME FedWatch tool.
- Silver could see an upside if it breaks above $31.10 and remains firm above the 20-day EMA current at $29.40.
- Factors affecting Silver prices include geopolitical instability, interest rates, US Dollar behavior, investment demand, and industrial usage.
- Silver prices tend to follow Gold’s movements, with the Gold/Silver ratio used to determine relative valuation.
Silver Price Trades Sideways Below $31.00 with Fed Policy in Focus
Silver price (XAG/USD) is currently moving below the key resistance level of $31.00 in Wednesday’s European trading session. The metal is holding steady as market participants eagerly anticipate the Federal Reserve’s (Fed) upcoming monetary policy announcement scheduled for 18:00 GMT.
Fed Policy Normalization Expected
The Fed is widely expected to make a shift towards policy normalization and deliver its first interest rate cut in over four years. Concerns about the weakening labor market have prompted this move, although officials remain optimistic that inflation levels are on track to reach the 2% target.
Likelihood of 50 bps Interest Rate Cut
Traders are closely watching for the magnitude of the interest rate cut by the Fed. Current data from the CME FedWatch tool suggests a 65% probability of a 50 basis points reduction, bringing rates to 4.75%-5.00%. The remaining possibility favors a 25-bps rate cut. Investors are also keen on the Fed’s dot plot and economic projections in addition to the policy decision.
Technical Analysis and Outlook for Silver
Silver price is positioned cautiously ahead of the Fed’s rate decision. A break above the September 16 high of $31.10 could trigger a fresh uptrend in the silver market. The asset’s short-term outlook appears positive as long as it remains above the 20-day EMA currently at $29.40. The RSI is showing upward momentum, with potential for further bullish moves.
Frequently Asked Questions about Silver
Silver is a valuable metal often traded by investors for its store of value and medium of exchange qualities. It can be purchased physically in the form of coins or bars, or traded through investment vehicles like Exchange Traded Funds. Silver prices are influenced by various factors including geopolitical events, interest rates, US Dollar performance, industrial usage, and overall demand dynamics.
Interconnected Factors Affecting Silver Prices
Silver prices are closely linked to Gold’s movements, as both metals are considered safe-haven assets. The Gold/Silver ratio can be used to determine the relative valuation between the two metals, providing insights for investors. Factors such as industrial demand, recycling rates, and economic conditions in major economies like the US, China, and India also play a significant role in shaping silver prices.