Silver Hits Two-Week High as Dollar Weakens Amid Fed Rate Cut Expectations

Silver prices tested a two-week high on Friday, while gold surged to an all-time high as the U.S. dollar weakened. The decline in the dollar was driven by growing expectations for an interest-rate cut from the Federal Reserve in September. Additionally, escalating tensions in the Middle East increased demand for safe-haven assets like precious metals. Both silver and gold are on track for weekly gains.

On Friday, Silver (XAG/USD) settled at $29.04, up $0.68 or +2.39%.

Weaker Dollar and Falling Yields Support Silver

The dollar index fell by 0.62%, marking its fourth consecutive week of losses. This decline made silver and gold more attractive to international buyers. U.S. Treasury yields also dipped on Friday, with the 10-year Treasury yield dropping 4.3 basis points to 3.883%. The 2-year Treasury yield saw a 4.9 basis point decrease to 4.052%. These lower yields followed a stronger-than-expected U.S. retail sales report, which indicated robust consumer spending and eased fears of an economic slowdown.

Inflation Data and Labor Market in Focus

Recent economic data, including the July retail sales and initial jobless claims, suggested a resilient U.S. economy. However, concerns about the labor market emerged after a weaker-than-expected jobs report earlier in the month. With inflation appearing to subside, as indicated by the latest consumer price index (CPI) and producer price index (PPI) releases, markets are now pricing in a potential 25-basis-point rate cut by the Fed in September.

Gold Surges to Record High, Silver Follows

Daily Gold (XAU/USD)

Gold prices broke through the $2,500 mark after a period of volatile trading, spurring silver to approach its 50-day moving average at $29.21. The upcoming Jackson Hole Symposium, where Fed Chair Jerome Powell is expected to speak, will be closely watched for further insights into the Fed’s monetary policy direction.

Market Forecast: Bullish Outlook for Silver

Given the weakening dollar, falling Treasury yields, and expectations of a Fed rate cut, silver prices are likely to remain supported in the near term. Investors should closely monitor Powell’s comments at Jackson Hole for further guidance on the Fed’s stance, which could solidify a bullish outlook for silver.

Technical Analysis

Daily Silver (XAG/USD)

Silver (XAG/USD), on Friday, closed in a position to challenge the 50-day moving average at $29.21, followed by a key 50% level at $29.50. Taking out the former will change the intermediate trend to up, while a move through the latter could trigger an acceleration to the upside with the pair of tops at $31.76 and $32.52 the next major target.

On the downside, the first support is a short-term pivot at $27.85. The second support is a long-term pivot at $27.22. Additonal support is the main bottom at $26.47 and the 200-day moving average at $26.24.