Silver price has advanced from $19.10 to $22.24 since the beginning of November 2022, and the current price stands at $21.62.
Inflation has begun giving signals of easing in the United States, and because of this, investors hope that the Federal Reserve could hint at slowing the pace of interest rate increases.
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The labor market in the United States is softening, which is also one of the reasons why the US central bank could revise and lower its plans.
The aggressive monetary policy from the US Central bank positively influenced the US dollar in the period of the last several months, and the most significant force behind the Silver price slide was the appreciation of the US dollar.
High-interest rates negatively influenced Silver’s status as a hedge against surging inflation as they translated into higher opportunity costs to hold the non-yielding asset.
The federal funds rate is now in a range of 3.75% to 4%, which is the highest level since January 2008, and investors will continue to observe every piece of data that could influence the Federal Reserve decision.
If Fed slows the pace of interest rate increases or even announces monetary easing, the US dollar will depreciate while the price of this precious metal will advance above the current levels. Carlo Alberto De Casa, an external analyst at Kinesis Money, said:
Overall, the scenario is improving for both gold and Silver. Gold is in a consolidation phase after the recent gains, and markets are in a wait-and-see mode, awaiting more clarity from the Fed.
Investors should also keep in mind that the global economy faces a recession risk that could dent corporate earnings and stock markets. Silver is considered a safe-haven asset, and investors usually move towards safe-haven assets in times of recession.
All eyes on the US Federal Reserve
Those interested in investing in commodities like Silver should consider that despite the current rise, the risk of another decline is still not over.
If the Fed takes a hawkish stance at its meeting in December, the US dollar will strengthen, and Silver will move lower, probably back below the $20 level.
The appreciation of the US dollar has a negative influence on Silver, and the price of this precious metal would not make any significant jump until the Fed shifts its policy from hawkish and goes back to monetary easing.
The important support level stands at $20, and if the price falls below this support, it would be a firm “sell” signal. The next price target could be around $18 or even below.
On the other side, if the price jumps above $23, it would be a signal to trade Silver, and we have an open way to resistance at $25.
Silver price has advanced from its recent lows below $20, and we could see even higher prices in the days ahead if the Fed slows the pace of interest rate increases. If the price jumps above $23, it would be a signal to trade Silver, and we have an open way to resistance at $25.