Key Points
- Silver has opened the week flat.
- The US Presidential Debate on Thursday may turn out to be a significant market driver.
- A daily trendline is in play for the XAG/USD from the 29.250 area.
Market Overview
2024 has been a big year for metals, including silver (XAG/USD). Prices are up nearly 25% since 1 January amid consistent bidding. The past two sessions have posted a significant pullback — is it time to buy a dip? Given the state of Fed monetary policy and the world’s geopolitical scene, a bullish play on silver makes a lot of sense.
A Weaker USD?
As a general rule, when the USD loses market share, precious metals rally. While this concept is often true, it doesn’t hold up 100% of the time. Monday’s action has been a prime example of this relationship breaking down. At press time, the USD Index is off more than ¼%, yet silver is trading flat. Limited participation has been the culprit, as liquidity providers are in no hurry to dive into silver.
During the US session, the 3 and 6-month T-Bill auctions were held. Rates fell slightly for each debt instrument but remain entrenched above 5%. If nothing else, the falling yields suggest that Fed rate cuts may be imminent. According to the CME FedWatch Index, there stands about a 70% chance of at least a ¼ point rate cut at the September meeting. If true, this projection will likely send the USD south, at least in the short term.
Technical Outlook
Sometimes, technical analysis is simple. On the XAGUSD daily chart, we have a clearly defined trend line in play. The key area to watch is downside support around 29.250. If this level gets tested, be ready for a bullish bounce back to the 30.000 handle.
On the other hand, the silver market could be in for a much larger correction should the trendline break. If that scenario plays out, be ready for a swift plunge to 28.000. At that point, the longer-term technicals will be in play as investors load up on silver as we wrap up Q2 and enter Q3.
Weekly Calendar
For metals traders, this week’s economic calendar is relatively vacant. The headliners are CB Consumer Confidence (Tuesday), US New Home Sales (Wednesday), Durable Goods Orders (Thursday), and Core PCE (Friday). The key event to watch out for in this group is the PCE report on Friday. The Fed watches PCE closely; if the numbers come in hot, then the USD will be in a position to rally.
One other event that could sway the markets is the first US Presidential Debate after the Thursday US close. Politics are poised to be a key market driver for 2024. It isn’t out of the question to see increased volatility as traders price in the potential winner of November’s election. This could immediately impact silver, especially if traders begin to favor safe havens as a hedge against political uncertainty.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
