Silver (XAG) Forecast: Middle East Tensions Drive Prices Higher Amid Lower Yields

LONDON (July 29) Silver prices are edging higher on Monday, bolstered by oversold technical conditions, a rise in gold prices, lower yields, and escalating tensions in the Middle East. The recent $4.00+ decline in the market has prompted investors to seek value, contributing to the uptick.

At 11:55 GMT, XAG/USD is trading $28.07, up $0.14 or +0.50%.

Escalating Middle East Tensions

Tensions in the Middle East have intensified following a rocket strike in the Israeli-occupied Golan Heights, which Israel and the United States attribute to Hezbollah. The attack, which killed 12 teenagers and children, has heightened fears of a broader conflict. Israel’s security cabinet has authorized Prime Minister Benjamin Netanyahu’s government to determine the “manner and timing” of a response. Although Hezbollah denies responsibility, Israel has vowed retaliation and conducted airstrikes on targets in southern Lebanon.

U.S. Treasury Yields and Economic Data

U.S. Treasury yields fell on Monday as investors awaited key economic data and the Federal Reserve’s upcoming meeting. The meeting, set to begin Tuesday and conclude Wednesday, is expected to provide insights into future interest rate decisions. While rates are anticipated to remain unchanged, investors are keen on any guidance regarding potential rate cuts and the overall monetary policy direction.

Fed officials have emphasized the need for more evidence that inflation is returning to the 2% target before considering rate cuts. Recent data, including the personal consumption expenditures price index, which rose 0.1% in June from the previous month and 2.5% year-over-year, supports this cautious approach.

Key Data Releases This Week

This week’s economic calendar includes the JOLTs job openings on Tuesday, ADP’s private payrolls report on Wednesday, and the July jobs report on Friday, which features nonfarm payrolls and unemployment data. Investors will scrutinize these reports for clues about the labor market’s health, which could influence future Fed decisions.

Market Forecast

Given the current geopolitical tensions and economic conditions, silver prices are expected to remain volatile in the short term. The escalating conflict in the Middle East is likely to continue supporting prices, while economic data and Fed policy decisions will play a crucial role in shaping market sentiment. Traders should prepare for potential fluctuations as these factors unfold.

Daily Silver (XAG/USD)

Silver (XAG/USD) is higher on Monday after oversold conditions forced profit-taking at $27.42 last week. The major support remains $27.22. It represents 50% of rally from $21.93 to $32.52.

Looking at the upside, the first resistance is a 50% level at $29.59, followed by the 50-day moving average at $30.02. Based on the current setup, the market is still in “sell the rally” mode.

FXEmpire