FUNDAMENTAL
OVERVIEW
Silver showed
surprising resilience on Friday, rising even after the US monthly
core inflation reading came in hotter than expected. The reaction was odd
because the data strengthened expectations for a Fed rate hike, with markets
now assigning an 87% probability to a 25 bps increase on Wednesday.
The broader
backdrop remains negative for precious metals. The surge in oil prices above
$100 has triggered a hawkish repricing across the board, pushing real yields
higher. Normally, that combination creates significant headwinds for silver.
Yet, silver has managed to hold above the key $63.00 support zone.
The next major
test comes on Wednesday with the FOMC decision. A 25 bps hike is widely
expected and would mark the Fed’s first rate increase since 2023. The bigger
risk for silver is therefore not the hike itself, but the dot plot and the tone
of the accompanying communication. Any hawkish surprise could push real yields
even higher and put renewed pressure on the metal.
At the same time,
developments in the Middle East remain a key focus. Rising oil prices have been
the dominant driver of financial markets, especially through their impact on
inflation expectations. A de-escalation could therefore have the opposite
effect, pushing oil prices lower and leading to an unwind in some of the more aggressive
rate hike bets. That would likely provide relief for silver.
For now, I see the
fundamental backdrop remaining tilted to the downside. Silver would likely need
either a dovish Fed or a clear improvement in the Middle East that brings oil
prices back down to shift the current picture. Until then, the combination of
elevated oil prices, higher real yields and tighter financial conditions
remains a challenging environment for precious metals.
SILVER TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that silver is trading at the key 63.00 support zone. This is where we can
expect the buyers to step in with a defined risk below the support to position
for a rally into the 71.55 resistance. The sellers, on the other hand, will
want to see the price breaking lower to increase the bearish bets into the
55.00 level next.
SILVER TECHNICAL ANALYSIS –
4 HOUR TIMEFRAME
On the 4 hour chart, we now
have a downward trendline defining the bearish structure. If we get a pullback
into the trendline, we can expect the sellers to lean on the trendline with a
defined risk above it to target a break below the support. The buyers, on the
other hand, will want to see the price breaking above the trendline to increase
the bullish bets into the 71.55 resistance next.
SILVER TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor downward trendline defining the bearish momentum on this timeframe.
The sellers will likely continue to lean on the trendline with a defined risk
above it to keep pushing into new lows. The buyers, on the other hand, will
look for a break to pile in for new highs, with the swing high around the 65.00
handle as the first target. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday, we have the FOMC rate decision. On Thursday, we get
the US Jobless Claims figures. Traders will also keep a close eye on
developments in the Middle East.
This article was written by Giuseppe Dellamotta at investinglive.com.