The silver price (XAG/USD) is experiencing difficulties in maintaining its position above the significant resistance level of $24.00. This struggle is occurring amidst an increase in demand for safe-haven assets. Investors are displaying cautious behavior ahead of key events such as the release of the FOMC minutes, Manufacturing PMI data, and labor market information. The decline in silver’s value can be attributed to the surge in demand for the US Dollar Index (DXY), leaving the white metal under pressure.
The market sentiment has turned downbeat as the week progresses. Weak overnight futures have already indicated a potentially negative open for the S&P500. Furthermore, the risk-appetite of market participants seems to be fading, leading to a rise in the 10-year US Treasury yields to approximately 3.96%. This increased risk aversion has prompted an improvement in the demand for safe-haven assets and consequently a higher value for the USD index, which has reached a weekly high near 102.00.
Investors are closely awaiting the publication of the Federal Open Market Committee (FOMC) minutes. These minutes will provide in-depth insights into the reasoning behind the Fed’s decision to maintain interest rates unchanged for the third consecutive time during the December monetary policy meeting. Additionally, the guidance regarding interest rates for 2024 will be of particular interest to market participants. The economic data to be released, including the ISM Manufacturing PMI for December and JOLTS Job Openings in November, will also be closely monitored for any potential impact on silver prices.
A concerning development in the silver market is the formation of a Head and Shoulder chart pattern on a two-hour scale. This pattern suggests a prolonged consolidation phase for the white metal. A significant sell-off could be triggered if the price drops below the crucial support level of $23.60. Furthermore, the struggle to sustain above the 20-period Exponential Moving Average (EMA) around $24.00 adds to the bearish sentiment surrounding silver. The Relative Strength Index (RSI) (14) also oscillates within the 40.00-60.00 range, indicating a consolidation phase ahead.
As silver faces downward pressure in the wake of increased demand for the US Dollar and a negative market sentiment, investors keenly await key events such as the FOMC minutes and economic data releases. The formation of a Head and Shoulder chart pattern raises concerns for the white metal and hints at a potential sell-off if crucial support levels are breached. Market participants will need to closely monitor silver’s performance in the coming days as it navigates through these challenging market conditions.
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