In the subdued trading environment ahead of the New Year on Monday, the silver price (XAG/USD) treads carefully near Friday’s low of around $29.50, with volumes remaining thin. The precious metal is under broad pressure because the US dollar’s outlook stays strong, fueled by expectations that the Federal Reserve’s (Fed) relatively moderate policy-easing cycle in 2025 will keep US Treasury yields aloft.
During Monday’s European session, 10-year US Treasury yields dipped by 0.5% but are still nearly 15% higher for the calendar year, hovering close to 4.60%. The US Dollar Index (DXY), which monitors the dollar’s value against six major currencies, has inched down yet remains largely range-bound around 108.00.
Market anticipation of a slower rate-cut path for the Fed next year originated from the central bank’s latest dot plot. It revealed that policymakers, in aggregate, foresee the Federal fund rate reaching 3.9% by the end of 2025. Fed policymakers have shifted from a dovish to a more cautious stance on interest rates, buoyed by positive US economic growth projections. Moreover, the slowdown in disinflation over recent months has led them to project fewer rate cuts for the upcoming year.
This week, investors will direct their attention to the December US ISM Manufacturing PMI data, set to be released on Friday. Estimates suggest the Manufacturing PMI will come in at 48.3, marginally lower than the previous 48.4, indicating a slightly quicker contraction in manufacturing output.
Silver Technical Analysis
After breaking down near $30.00, silver has stayed beneath an upward-sloping trendline that was drawn from the February 29 low of $22.30 on a daily chart. The white metal hovers around the 200-day Exponential Moving Average (EMA), painting an uncertain long-term picture.
The 14-day Relative Strength Index (RSI) lies within the 20.00 – 40.00 range. If it persists in this zone, it could trigger a new wave of bearish momentum. Looking at support levels, the September low of $27.75 would be crucial for silver prices. On the upside, the 50-day EMA, around $30.90, would pose a significant barrier.
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