Silver forecast: Since silver substantially increased in May, it has underperformed in the past few months. Silver was more severely affected by the recent market volatility than gold was because of its higher risk sensitivity, which was caused by the unwinding of yen-funded carry transactions. Still, silver seems to be establishing a base as market circumstances level off, so a recovery this month is not out of the question.
Rates traders have reevaluated the possibility of significant rate cuts by the Federal Reserve since the market has grown calmer since last Tuesday. The market views a 25-or 50-basis-point cut as equally likely at the September FOMC meeting, notwithstanding earlier anxieties that led to anticipation of an emergency rate cut before September. Silver has been able to recuperate part of its recent losses caused by the yen-funded carry unwind, thanks to the lessened market fear and the resulting calmer environment.
Critical economic data this week: impact on silver forecast
Important economic data from the United States and China will significantly impact the silver outlook this week. If US inflation data does not reveal any significant upward shocks, the US dollar index—which has an inverse relationship with silver prices—could fall. Silver could benefit from lower inflation if interest rates don’t have to be raised.
On Wednesday, we will get the US Producer Price Index (PPI) and on Tuesday, we will see the US Consumer Price Index (CPI). The US dollar could be under pressure, and silver prices could rise if the recent dismal employment data and ISM manufacturing PMI numbers indicate a potential for weaker inflation.Forecasts in the market indicate that headline and core inflation rates, as well as PPI, will increase by a small 0.2% month-on-month. Inflation data that is worse than thought would boost market expectations for several rate cuts in 2024, which might lead to an increase in silver prices.
Silver traders will monitor US inflation on Thursday and retail sales data and earnings announcements from big-box stores like Home Depot and Walmart. These statistics may shed light on the US consumer’s well-being and how strict monetary policy has affected spending, both of which have the potential to affect the silver market. The Chinese government will reveal data on industrial production and investment in fixed assets on Thursday, which might be good news for industrial metals like copper and silver.
Silver technical analysis: bullish momentum building
On a technical level, silver could break out to the upside. The corrective phase may have ended, and a new rally in silver prices could be on the horizon, according to last Thursday’s bullish engulfing candle. After finding a solid launch point in May, silver has since rebounded from a crucial long-term support zone between $25.75 and $26.50. If prices keep increasing, this support level will be even more satisfying for the bulls. A quick recovery is crucial now more than before.
A strong closing over the $28.00 resistance level would be perfect for the bulls, with a more substantial level of resistance approaching around $28.65. Assuming there are no big surprises in the US inflation figures, a break through these levels would indicate that the rally that started in March is continuing, which might lead to a much larger move higher. If you’re looking to sell, $27.55 is an excellent immediate support level, followed by last Thursday’s high of $27.26. If silver wants to keep its rebound momentum going, it must close the next few days at these support levels.
A word or two on gold
The fact that gold has managed to rise above the shaded grey area on the chart, which represents the highs from April and May and ranges from $2431 to $2450, implies that a new all-time high surpassing $2483 is on the horizon. Consequently, the XAUUSD prognosis is optimistic, and if the price of gold hits a new high, it will almost certainly have a beneficial effect on the cost of silver.
Now that investors are bracing for crucial economic data, the silver forecast is cautiously optimistic, and there is a bullish correlation between gold and silver price movements. Silver may be able to rebound from its recent lows and perhaps resume its upward trajectory if fundamental and technical elements align favourably. U.S. inflation and retail figures will significantly impact the near-term movement of gold and silver, so keep an eye on them.
