- Silver price corrects after nearing the top of a major range at circa $26.00.
- The decline could be as a result of fading hopes the Federal Reserve will cut interest rates in the near term.
- Long-term fundamentals, however, support, including positive global growth and robust demand.
Silver price (XAG/USD) pulls back at the start of the week and is trading in the $25.10s after reaching close to the top of a long-term range. It is possible the correction is due to a change in expectations regarding the future path of interest rates, which are now expected to remain higher for longer in the US.
Silver, like Gold, is a non-yielding asset so it tends to carry an opportunity cost – the price holders must pay for not staying in cash and earning interest. Recent US inflation data showed inflation remaining stubbornly high. This has delayed the time when the Federal Reserve (Fed) is expected to pull the trigger on cutting interest rates, which could be a factor weighing on the Silver price.
Silver: Long-term bullish fundamentals
Interest rates are not the only factor affecting the price of Silver, however. The precious metal is used in a variety of industrial processes, and an overall positive outlook for global growth is a beneficial factor for Silver demand in the long-term.
Chinese data released on Monday showed a higher-than-expected rise in Industrial Production, demonstrating a positive sign for the demand for Silver. Recent data from the US Federal Reserve also showed US Industrial Production beating estimates in February, indicating a potential rise in demand for Silver as well.
Silver price could experience further gains as global demand increases for its use in various applications, such as the manufacturing of Solar Panels, electronic devices, and jewelry. This diverse usage contributes to the positive outlook for Silver’s demand, according to analysts.
The Silver Institute has forecast robust demand for Silver in 2024, predicting a significant rise in demand to 1.2 billion ounces, signaling continued strength in the market.
Technical Analysis: Silver knocks on the top of range
From a technical perspective, XAG/USD pulls back after almost reaching the top of a defined range. A breakout above key levels could lead to a significant bullish rally, with potential price targets set at different Fibonacci ratios. Traders should monitor price action closely for confirmation of a breakout before considering entering the market.
Silver versus US Dollars: 4-hour chart