Silver's price is under pressure, and the outlook isn't looking bright. At 15:20 GMT, silver (XAG/USD) is trading at $47.17, a decrease of $0.91, or -1.90%. This downward trend is fueled by several factors, and understanding them is key to navigating the market.
On the upside, minor resistance levels are observed at $49.38 and $49.46. More significant resistance is found in the $50.02 to $51.07 range, representing the 50% to 61.8% retracement levels of the recent price increase. The immediate pivot point for short-term direction is near $45.79.
But here's where it gets interesting: the U.S. dollar is flexing its muscles. The U.S. dollar index has climbed above 100 for the first time since early August. This strength is largely due to diminishing expectations of a rate cut by the Federal Reserve in December. Federal Reserve Chair Jerome Powell's recent statements suggest that the quarter-point rate cut last week may be the last one this year, causing a shift in market sentiment. The likelihood of a December rate cut has decreased to 65%, down from 94% a week earlier.
This strengthening dollar has put a damper on precious metals, with gold also experiencing a decline, falling below $4,000. Silver is following suit, trending downwards. The dollar, along with the yen and Swiss franc, is benefiting from safe-haven demand as risk sentiment wanes, driven by weak manufacturing data and the ongoing economic uncertainty caused by the U.S. government shutdown.
And this is the part most people miss: the U.S. government shutdown is creating a data vacuum, further complicating the market outlook. The absence of crucial economic data, such as the JOLTS report and October's jobs numbers, has forced traders to rely on alternative indicators. The ADP private payrolls report and ISM data, which indicated continued weakness in U.S. manufacturing, are being closely watched.
As a result, Treasury yields are slightly down. The 10-year yield fell to 4.089%, while the 2-year yield declined to 3.578%, reflecting investors' cautious approach.
Do you think the current economic conditions will continue to weigh on silver prices? Share your thoughts in the comments!
