Silver Attempts Recovery From $22.40 Lows Despite Tempered Fed Rate-Cut Bets

(19 January, 2024 - Sagar Dua)

• Silver price finds an interim support near $22.40 amid geopolitical tensions.
• The Fed is expected to maintain status-quo in January policy meeting for the fourth time in a row.
• Fed Bostic warns about upside risks of inflation on premature rate cuts.

Silver price (XAG/USD) recovers to near $22.70 as the US Dollar Index (DXY) struggles to extend recovery and Middle East tensions keep driving flows for safe-haven assets. The white metal bounced back from two-months low of $22.43 but is still incapable to convince investors that a solid recovery is on cards.

S&P500 futures remains flat in the Asian session, portraying a cautious market mood. The USD Index oscillates inside Thursday’s trading range amid absence of front-line economic indicators. 10-year US Treasury yields have climbed to near 4.17%.

Meanwhile, investors shift focus towards the Federal Reserve (Fed) monetary policy meeting, which will be announced on January 31. The Fed is widely anticipated to maintain interest rates unchanged in the range of 5.25-5.50%. Investors will keenly focus on the guidance on interest rates as when the Fed is considering its first rate-cut after a historically swift ‘rate-tightening’ campaign.

On Thursday, Atlanta Fed Bank President Raphael Bostic said rate-cuts can be announced sooner if the central bank has ‘convincing’ evidence that inflation will return to the 2% target in a timely manner. Bostic warned that premature rate cuts and boost overall demand and push price pressures higher, which can spoil efforts yet made to contain stubborn inflation.

Silver technical analysis

Silver price oscillates inside the Descending Triangle chart pattern on a daily scale, which indicates a sharp contraction in volatility. The asset hovers near the horizontal support of the aforementioned chart pattern, which is December 13 low of $22.50. The downward-sloping trendline of the volatility contraction pattern is plotted from December 3 high at $25.92.

The 20-period Exponential Moving Average (EMA) near $23.20 continues to act as a resistance for Silver price bulls.

The Relative Strength Index (RSI) (14) is at a make or a break level. A convincing stability in the 20.00-40.00 range will trigger a bearish momentum.