Silver Prices Forecast: Underpinned by Dovish Fed, Falling Yields and Dollar

NEW YORK (December 15) Silver (XAG/USD) is exhibiting an inside move in trading on Friday, indicating a contraction in volatility. As of 08:32 GMT, the metal is slightly higher, trading at $24.17, consolidating within the range set by the previous day.

Federal Reserve’s Policy Impact

The Federal Reserve’s latest policy meeting marks a pivotal shift, signaling the potential end of its monetary tightening cycle. Fed Chair Jerome Powell’s remarks suggest a move towards reducing borrowing costs, with the majority of Fed policymakers anticipating lower interest rates by the end of 2024.

Treasury Yield Fluctuations

Post-Fed announcement, Treasury yields have dropped to multi-month lows. The notable decrease in the yield of the 2-year Treasury note, which is a gauge for Fed rate expectations, mirrors a de facto rate cut. The 10-year Treasury note yield, a key indicator for borrowing costs, has also seen a significant decline.

US Dollar Dynamics and Global Currency Reactions

In response to the expected rate cuts, the U.S. dollar has reached a four-month low, resulting in a considerable weekly drop in the dollar index. This shift has positively impacted the euro and pound, highlighting the influence of global central bank decisions on currency markets.

Silver’s Market Outlook

This backdrop of the Fed’s dovish turn and decreasing Treasury yields sets a supportive stage for silver prices. Current market sentiment points towards a high probability of a Fed rate cut by March, aligning with a global trend towards softer monetary policies.

Given this environment, silver’s short-term outlook appears bullish, with the precious metal’s price movement currently constrained by the inside day pattern, typically indicative of a continuation of the prevailing trend.

FXEmpire