Silver Price Forecast: XAG/USD struggles near $30 amid uncertainty over size of Fed interest rate cuts

  • Silver price faces pressure to extend its rally above $30.00 as US bond yields rise.
  • The Fed appears poised to cut interest rates in September.
  • Investors are eagerly awaiting US core PCE inflation data for July.

Silver (XAG/USD) price is struggling to extend its upside above the psychological resistance of $30.00 in Tuesday’s New York session. The near-term outlook for the white metal remains bullish as the Federal Reserve (Fed) is widely anticipated to start cutting interest rates from the September meeting. As investors seek clarity on the likely size by which the Fed will cut its key interest rates.

According to the CME FedWatch tool, 30-day federal funds futures price data show that the probability of a 50 basis point (bps) interest rate cut in September is 28.5%, while the rest favor a 25 bps cut.

Meanwhile, San Francisco Fed President Mary Daly supported a quarter- to one-percentage-point interest rate cut in September in her interview with Bloomberg on Monday. However, she left the door open for a larger one if the labor market deteriorates.

Firm optimism over Fed interest rate cuts in September continues to weigh on the US Dollar and bond yields. The Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, sees further downside below the year-to-date (YTD) low of 100.53. US 10-year Treasury bond yields jump near 3.86% amid caution ahead of the US (US) Core Personal Consumption Expenditure (PCE) Price Index data for July, due on Friday.

In general, higher yields on interest-bearing assets are unfavorable for non-yielding assets, such as Silver, as they reduce the opportunity cost of holding an investment in them.

Technical analysis of Silver

Silver price rebounded strongly after finding firm buying interest near August 1 high of $29.16 on the four-hour time frame. The white metal is expected to extend its rise towards July 11 high of $31.75. The upward sloping 20-day exponential moving average (EMA) near $29.70 warrants further upside.

The 14-period Relative Strength Index (RSI) is oscillating in the bullish range of 60.00-80.00, indicating strong bullish momentum.

Silver four-hour chart

Source: Fx Street

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