The Silver Spot Price (XAGUSD) has been under pressure in 2024 amid the unrelenting strength of the U.S. dollar. Trading at just above $23.00, the Silver Spot Price reflects a 2.93% year-to-date decline, eclipsing even last year’s losses.
Fuelling this descent is a potent cocktail of economic data. A robust U.S. labour market and unexpectedly high inflation figures, with January’s 3.1% exceeding expectations, have propelled the Dollar upwards. This inflation data shattered any lingering hopes of a Federal Reserve rate cut in March. Following the Consumer Price Index (CPI) report, the market’s expectations of a May rate cut plummeted from 50% to a mere 33.7%.
This shift in sentiment paints a stark picture for Silver. Higher interest rates in the U.S. make dollar-denominated assets more attractive, drawing capital away from alternative investments like Silver. This capital flight puts downward pressure on the Silver Spot Price, leaving it struggling under the Greenback’s increasingly heavy grip. With anticipation building for the Federal Reserve’s next move, all eyes are on today’s release of the FOMC Minutes.
Technical
The Silver Spot Price (XAGUSD) recently embarked on an upward trajectory, crossing its 100-day moving average in a display of bullishness.
After an initial dip, buyers emerged at the 21.925 support level, where oversold conditions on the RSI signalled potentially exhausted selling pressure. This ignited a rally that pushed the price beyond the moving average, only to encounter resistance at 23.494, coinciding with overbought readings on the RSI indicator. Here, the pendulum swung once more as selling pressure emerged.
The spot price retraced, finding temporary support at the 38.20% Fibonacci Retracement level, where some buying activity materialized. If upside momentum persists, a retest of the 23.494 resistance level is probable. In contrast, a breakdown below the 38.20% level on high volume could indicate intensifying selling pressure, with the 50% level potentially serving as the next key support level.
Summary
Despite subtle highlights of gains, the Silver Spot Price’s 2.93% year-to-date decline reflects the Dollar’s dominance. Robust U.S. data dashed rate cut hopes, boosting the Greenback. The FOMC Minutes loom large, potentially impacting sentiment. Technically, the 38.20% Fibonacci level offers temporary support, but a breakdown below this level could signal further downside potential.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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