Silver Daily Price Analysis – Silver Takes a Hit Following Fed’s Decision to Maintain High-Interest Rates

On Thursday, silver prices declined by 1.64% due to the strong U.S. dollar and decreased demand for silver as a safe-haven asset amidst geopolitical stability and positive global equity markets.

Key Points

• Q1’s higher-than-expected employment cost index supports continued restrictive monetary policy.
• Today’s U.S. labor market data could further sway Fed policy and silver pricing.
• Silver remains under the 200 EMA, with an oversold RSI suggesting a potential but limited rally.

Silver Daily Price Analysis – 02/05/2024

Silver prices experienced a modest gain on Wednesday, climbing to an intraday high of $26.7 per ounce. This movement aligned closely with market reactions to Federal Reserve Chair Jerome Powell’s speech following the Fed’s decision to maintain interest rates at their current levels for the sixth consecutive time. The decision was influenced by persistent inflation concerns, as indicated by recent economic data. 

The employment cost index, which saw a significant rise to 1.2% in Q1 from 0.9% in the previous quarter, surpassed expectations and pointed to ongoing inflation risks. These factors, combined with the PCE figures, have reinforced the expectation that the Fed might sustain its restrictive monetary policy stance throughout the year.

Moving into Thursday, silver opened at $26.64550 but reversed the previous day’s gains, dropping to a current price of $26.22450, marking a 1.64% decline. The retracement can be attributed to the market digesting the implications of continued high-interest rates and a robust U.S. dollar, which often moves inversely to dollar-denominated assets like silver. Additionally, geopolitical calmness and a positive tilt in global equity markets have lessened the appeal of silver as a safe-haven asset.

Key Economic Data and News to Be Released Today

The focus for today remains on key U.S. economic releases such as the Challenger Job Cuts and the Weekly Initial Jobless Claims. These indicators will provide further insight into the labor market’s health and could influence Fed policy expectations. Moreover, the Trade Balance figures are anticipated to shed light on the international trade dynamics that may impact market sentiment.

Investors are likely to adopt a cautious stance as they anticipate the release of the U.S. Nonfarm Payrolls (NFP) report on Friday. This high-impact data is expected to be a significant market mover, providing critical insights into employment trends and wage growth, which are pivotal in shaping the Fed’s rate decisions. The outcome of these reports could either solidify or challenge the prevailing market expectations regarding the Federal Reserve’s monetary policy trajectory.

Visit our Economic Calendar

Silver Technical Analysis – 02/05/2024

Silver prices have experienced significant bearish momentum today, positioning below the crucial 200 EMA, which traditionally signals a potential for continued downward movement. As the market remains entrenched in this bearish trend, traders should prepare for the possibility of further declines throughout the trading day.

Currently, the Relative Strength Index suggests that silver is in oversold territory, hinting at an imminent, albeit short-lived, corrective rally. The price found minor support around the $26.20 level, indicating a potential bounce in the near term. However, traders should monitor this closely, as a failure to sustain above today’s low could lead to a reinforcement of the bearish trend and potentially deeper losses.

So, while a temporary pullback might offer short-term buying opportunities, the prevailing market conditions underpin a bearish outlook for silver.

Silver Fibonacci Key Price Levels 02/05/2024

Short-term traders planning to invest in Silver today should keep a close eye on the following key price levels for the day: