The silver price (XAG/USD) has witnessed a significant rally, reaching a fresh four-week high above $31.50 at the start of the week. This upward movement is largely driven by growing confidence among financial market participants that the Federal Reserve (Fed) will implement a 25 basis points (bps) interest rate cut, bringing the rate down to 4.25%-4.50% during its policy meeting on December 18.
The CME FedWatch tool shows a notable shift in probabilities, with the likelihood of a 25 bps rate cut increasing to 87% from 62% just a week ago. Historically, such a scenario tends to put downward pressure on the US Dollar (USD) and bond yields. For non-yielding assets like silver, this is advantageous as lower yields mean a reduced opportunity cost for holding these investments.
The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, has struggled to sustain above the crucial level of 106.00 and has since retreated. Meanwhile, 10-year US Treasury yields have ticked higher, approaching 4.16%.
However, there are other factors at play that could impact silver’s price. There are fresh attempts at brokering a ceasefire between Russia and Ukraine by US President-elect Donald Trump. Trump’s statement on a social media platform about Zelenskyy and Ukraine’s inclination to make a deal could potentially dampen the safe-haven demand for silver. Typically, precious metals like silver see increased demand in times of heightened geopolitical uncertainty, but a ceasefire would likely reduce that factor.
This week, investors’ attention will be firmly fixed on the closed-door annual central economic work conference scheduled for December 11-12, as reported by Bloomberg. The committee is expected to outline priorities for the upcoming year and closely examine the current economic performance. Given silver’s wide application in various industries, the outcome of this conference is likely to have an influence on its price.
In terms of technical analysis, silver price has shown strong momentum. It has rallied close to $31.60 after breaking through the three-day resistance level at $31.30. Moreover, it has climbed above the 20- and 50-day Exponential Moving Averages (EMAs) near $31.10 and $31.20 respectively, indicating a robust uptrend. The 14-day Relative Strength Index (RSI) is approaching 60.00, and a decisive break above this level would further solidify the bullish momentum. Looking at support levels, the upward-sloping trendline around $29.50, which was plotted from the February 29 low of $22.30 on a daily timeframe, will serve as a key support. On the upside, the horizontal resistance drawn from the May 21 high of $32.50 will act as a barrier for further price increases.
Related topics:
Gold Price in Limbo, Awaiting US NFP Report for Direction
USD/INR Gains as Indian Rupee Weakens Amid Multiple Factors
EUR/USD: Caution Prevails Ahead of French No-Confidence Vote
