XAG/USD 240 Minute Chart Analysis – 2023-10-20

Silver prices have been influenced by a variety of macroeconomic and geopolitical factors recently. Persistent concerns over the Israel-Hamas conflict have heightened the appeal of safe-haven assets, causing silver to approach significant price milestones. This is further compounded by the uncertain signals from the U.S. regarding interest rates. The dollar experienced a temporary setback, and Treasury yields showed overnight weakness. This was in response to remarks from the Federal Reserve Chair, Jerome Powell, hinting that the surge in yields could potentially negate the necessity for further Fed action.

Although Powell intimated the possibility of an additional rate hike this year, the broader market interpretation leaned towards the conclusion that the Fed might be winding down its interest rate hikes. Such an inference led to profit realization in the dollar and a decline from the recent highs in yields. However, it’s noteworthy that the 10-year rate lingered near the 5% mark.

The combination of subdued yields, a softer dollar, and mounting safe-haven appeal due to the Israel-Hamas tensions bolstered silver prices. The market is closely observing the potential escalation in the Middle East conflict.

Nevertheless, Powell’s open stance on further rate hikes could act as a dampener to an extended rally in silver. If upcoming economic data indicates robustness in the U.S. economy coupled with persistent inflation, the surge in silver prices may be curtailed. It’s imperative to highlight that taming inflation remains the primary objective of the Fed. Even though inflation has decreased considerably in the last year, it is still hovering above the Fed’s 2% benchmark.

The projection for U.S. rates is to stay elevated, possibly surpassing 5%, at least until the end of 2024. This spells sustained pressure on assets like silver that don’t yield returns.

Currently, silver showcases a bullish sentiment within a defined range, standing at the 22.930 level. The price trajectory is north of both the 50 and 200 Day Moving Averages, suggesting a range-bound market sentiment. There are two potential scenarios:

 Silver might descend to retest the 22.850 and 22.640 markers. Should it breach these levels, a further decline towards 21.445 could be on the horizon. Key support levels to watch are 22.332 and 21.987. Conversely, from its present position, the price could ascend to challenge the 23.230 level. Potential resistance might be encountered at 23.360. If momentum remains bullish, silver might attempt to breach the 23.567 and 23.668 thresholds, which are critical resistance zones.