Silver (XAG) Forecast: Will Fed Uncertainty Keep Silver Below 50-Day MA?

LONDON (November 28) Silver prices are experiencing downward pressure as the U.S. dollar shows renewed strength during the Thanksgiving holiday period. The dollar index has moved up to 106.30, recovering from a recent two-week low of 105.85 after its steepest four-month decline. This dollar strength creates direct bearish pressure on silver prices, as a stronger dollar makes commodities more expensive for international buyers, typically reducing demand.

What Are The Latest Economic Signals?

Recent Core Personal Consumption Expenditures (PCE) data reveals persistent inflation challenges, forcing markets to reassess their expectations for Federal Reserve policy in 2024. The Fed’s ongoing battle to reach its 2% inflation target, combined with potential trade policy shifts, is creating a complex environment for rate cut decisions. Higher interest rates typically pressure silver prices by increasing the opportunity cost of holding non-yielding assets.

How Are Traders Positioning During The Holiday?

Market participants now price in a 64.7% probability of a quarter-point rate cut in December, according to CME Group’s FedWatch tool. This reflects growing uncertainty about the pace of monetary policy easing, while trading volumes remain light during the U.S. Thanksgiving holiday closure. The reduced probability of rate cuts creates a bearish scenario for silver, as markets had previously priced in more aggressive easing.

Could Trade Tensions Impact Silver Prices?

Mexican President Claudia Sheinbaum’s warning about potential retaliatory measures against proposed 25% U.S. tariffs introduces new trade war concerns. This development could create a bullish catalyst for silver prices, as the metal traditionally benefits during periods of geopolitical tension and trade disputes. Historical data shows silver typically gains 8-12% during significant trade conflicts.

FXEmpire