Key Takeaways
- A slow news week will likely lead to extended periods of silver consolidation.
- The US election and Fed policy are the key market drivers impacting silver.
- The technical area just beneath 33.0000 has proven to be valid natural resistance and a viable sell entry.
Market Overview
The past several days have been a rollercoaster for silver (XAG/USD) traders. Prices have been all over the place as the markets priced a hot US CPI reading. What’s next? With CPI now out of the way, all eyes are focused on the US election and Fed expectations.
US Election
Since Friday’s close, the US election has taken an interesting turn. Recent polls suggest that former President Donald Trump is surging, and Vice President Kamala Harris is beginning to lag. NBC reports the race as a statistical dead heat, with each candidate receiving 48%. This sentiment is widespread, with most believing that the election is “too close to call.”
Over the past 72 hours, betting markets have shifted towards Trump. Political trading website PolyMarket has Trump as a 58.3% to 41.5% favorite. With nearly 2 billion dollars in traded volume, this is the largest market on the board for the 2024 Presidential Election Winner.
As a general rule, uncertainty drives precious metals higher. Uncertainty surrounding Election 2024 has been a bullish catalyst for gold and silver. As the American leadership picture becomes clear, bids are likely to taper a bit. A short-term correction in silver is certainly possible as the election is decided.
Fed Expectations
Last Thursday’s US CPI report was an eye-opener for fans of dovish Fed policy. CPI rose month over month, eclipsing expectations by 0.1%. The report surprised many economists, as most believed the long-awaited “disinflationary cycle” had arrived.
The unexpectedly hot CPI report sent interest rate expectations reeling. Initially, the markets were pricing a series of aggressive ½ point rate cuts to wrap up 2024. That quickly changed as the markets debated the impact of entrenched inflation. At press time, the CME FedWatch Index assigns a 92.1% chance of a ¼ point rate cut. A month ago, the CME FedWatch Index assigned a 50% chance of a ¼ point and a 50% chance of a ½ point rate cut. To say the least, this is a significant hawkish shift.
Bottom line: the dollar has strengthened as rate-cut expectations have fallen. This is a bearish market driver for silver.
XAG/USD: Technical Outlook
33.00 has been a key technical level for silver. Until proven otherwise, this area is best respected as viable natural resistance.
The 32.5185 – 32.9625 pricing zone is a vital supply area. A short-term selloff is likely if the XAG/USD can muster another test of this level. Overall, a pre-election run at 33.0000 should offer solid selling opportunities from the 32.7500 vicinity.
With only 22 days from the next Fed meeting, this week’s economic calendar is relatively vacant. Due to a lack of market-moving events, a period of calm silver market conditions is probable. Of course, anything can happen, and it pays to be prepared for the unexpected!
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.
