Silver Prices: Traders Cautious Ahead of Retail Sales, Fed Speakers

LONDON (June 18) Silver prices are facing headwinds on Tuesday from rising U.S. Treasury yields and mixed signals from Federal Reserve officials regarding potential rate cuts. This creates a cautious short-term outlook, but long-term prospects remain bullish.

At 11:01 GMT, XAG/USD is trading $29.12, down $0.35 or -1.20%.

Rising Yields Weigh on Silver

The 10-year Treasury yield climbed above 4.28% on Tuesday, increasing the opportunity cost of holding non-yielding assets like silver. This discourages investor demand and puts downward pressure on silver prices. Short-term traders should be cautious of this factor, as further yield increases could trigger additional price declines.

Fed Rate Cut Outlook Unclear

While the Federal Reserve held rates steady last week, comments from Fed officials like Neel Kashkari and Patrick Harker suggest a single rate cut might be possible later in the year, depending on economic data. However, the Fed is wary of cutting too soon with inflation still hovering above its 2% target. This uncertainty creates a wait-and-see approach for traders, with the potential for price swings depending on the Fed’s next move.

Market on Hold, Retail Sales Data Eyed

The lack of a clear Fed stance and choppy price action over the past few days indicate market indecision. Today’s retail sales data is a key event that could influence silver’s direction. A significant drop in sales might trigger a break below the 50-day moving average at $23.54, which could be a bearish signal for short-term traders.

Short-Term Forecast: Cautious

Silver’s near-term outlook is cautious due to several factors. Incoming economic data, especially Friday’s flash PMI data, and future pronouncements from Fed officials will be closely scrutinized. The market currently expects a 75% chance of a rate cut in November, potentially supporting silver prices. However, short-term traders remain concerned about upside risks like persistent inflation and further yield increases.

Long-Term Bullish

Despite the short-term headwinds, silver retains its long-term bullish potential. Geopolitical uncertainty, ongoing industrial demand, and its role as a hedge against inflation are positive factors for long-term investors. A potential rate cut later in the year could further bolster this thesis. However, long-term investors should remain vigilant and monitor the evolving economic situation.

FXEmpire