- The price of Silver corrects after approaching the maximum of an important range around $26.00.
- The decline could be due to fading hopes that the Federal Reserve will cut short-term interest rates.
- However, long-term fundamentals are supportive, such as positive global growth and strong demand.
The price of Silver (XAG/USD) declines at the beginning of the week and is trading at $25.10 after approaching the maximum of a long-term range. The correction is likely due to a change in expectations about the future path of interest rates, which are now expected to remain “upward for longer” in the United States.
The price of Silver, like Gold, is a non-yielding asset, so it usually carries an opportunity cost, that is, the price that holders must pay for not remaining in cash and earning interest. The latest US inflation data shows that inflation remains stubbornly high. This has delayed the timing of when the Federal Reserve (Fed) is expected to pull the trigger on cutting interest rates, which could be a factor weighing on the price of Silver.
Silver: Long-term bullish fundamentals
However, interest rates are not the only factor that affects the price of Silver. The precious metal is used in various industrial processes and the positive outlook for global growth is a beneficial factor for long-term demand for Silver.
Chinese data released on Monday showed a stronger-than-expected rise in industrial production, with an increase of 7.0% in February, exceeding the 5.0% forecast and the previous 6.8%. Fixed asset investment – ​​which is investment in plant and machinery – rose 4.2% in February, up from previous estimates of 3.2% and 3.0%. Retail sales grew more than expected but less than previously, according to China's National Bureau of Statistics.
The latest data from the US Federal Reserve also showed that US industrial production beat estimates in February and improved from January's negative 0.5%.
According to Marcus Garvey, an analyst at Macquarie, the price of Silver could continue to rise as global demand increases for its use in the manufacture of solar panels, a wide variety of electronic devices and jewelry.
The Silver Institute, a US-based non-profit organization, has forecast strong demand for Silver in 2024, predicting it will see its second-best year on record, with demand rising to 1.2 billion ounces. .
Technical analysis: Silver price hits the top of the range
From a technical point of view, XAG/USD is retreating after almost reaching the top of a range that extends between $19.00 and $26.00. This range in turn lies within a broader range between $17.50 and $30.00.
A decisive break above $25.85 would likely signal an upside breakout, substantially increasing bullish enthusiasm.
The price of silver could then rise to around $29.50, if the 0.618 Fibonacci ratio of the range is used, or to just below $32.00 if the entire height of the range is extrapolated.
In the latter case, it would mean that the pair has also broken the top of the broader range, which would indicate even further upside, potentially to a target of $37.50.
Silver vs. US Dollar: 4-hour chart
On the other hand, the precious metal could encounter stiff resistance at the range highs of $25.80-$25.90 and pull back.
Investors should watch for a decisive breakout to the upside before jumping in. A “decisive” breakout is one characterized by a long green daily candle piercing clearly above the level and closing near its high, or three green candles in a row breaking above the level.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
