Silver Price Forecast: XAG/USD surges towards $19.00 as the US dollar trips down
- Silver prices recovered from weekly lows at $17.94 and gained almost $1 on Wednesday.
- The British pound crisis augmented the appetite for precious metals, a headwind for the greenback.
- US Fed officials emphasized that the US Federal funds rate (FFR) might peak at around 4% by the year’s end.
Silver price bounces off weekly lows at around $18.00 a troy ounce as the greenback plunges from YTD lows above the 114.00 figure, undermined by US Treasury bond yields sliding, amid a risk-on impulse as shown by US equity markets finishing in the green. At the time of writing, the XAG/USD is trading at $18.87 a troy ounce, 2.50% above its opening price.
XAG/USD pares weekly losses buyers eye $19.00
Recent developments in the financial markets finally triggered safe-haven flows toward precious metals. The British pound currency crisis, triggered by PM Liz Truss’s new government plagued with tax cuts, increased worries that inflation in the UK might get out of control. Therefore, the Bank of England stepped into the bond markets, buying 30-year gilts to ease investors’ fears, and postponed the Quantitative Tightening (QT) by the end of October.
The greenback’s fall from 20-year highs opened the door for the white metal recovery, despite US central bank hawkish rhetoric, led by Atlanta’s Fed President Raphael Bostic, who said that inflation is “too high” and he backed up a 75 bps rate hike in November and 50 in December.
Of late, the Chicago Fed President Charles Evans said that the Fed is increasing rates at a faster pace to tame “very high and persistent inflation” and expected the Federal funds rate (FFR) to peak around 4.50-4.75%.
The US Dollar Index, a gauge for the buck’s value against its peers, plunged 1.29%, down at 112.711, refreshing its weekly lows, undermined by the US 10-year T-bond yield, dropping 22 bps, at 3.737%.
Given the scenario mentioned above, the US dollar fall was a tailwind for XAG/USD price. Even though the white metal began trading around the $18,30s region and reached a daily low at $17.84, it bounced off and rallied sharply to current spot prices.
Data-wise, the US economic docket featured August’s Pending Home Sales, which shrank 2% more than the 1.5% decrease estimated, contracting to its lowest level since 2011.
What to watch
The US economic calendar will feature the Gross Domestic Product (GDP) for the second quarter on its final reading, estimated at -0.6%, alongside the Initial Jobless Claims, for the week ended on September 24.
XAG/USD Key Technical Levels