Jul 04, 2023

Silver prices have pushed above support after a recent slump and could move higher.

XAGUSD Daily Chart

XAGUSD: Daily Chart

XAGUSD has pushed through previous support at the $22.80 level and could move higher. The price is at a crossroads, and a drop to $20 or a move higher towards $24.50 is possible.

The price of silver will likely depend on the actions of the Federal Reserve, which has continued to raise interest rates.

Federal Reserve officials “almost overwhelmingly… think that we need to do more,” Jerome Powell said last week.

Further rate hikes could support the US dollar and hurt the price of silver, but the Fed may be done with its rate hikes. One of the inflation indices closely followed by the Federal Reserve dropped last month to its lowest level since April 2021, driven by lower gas prices and reduced food costs.

The inflation index printed a 3.8% rise in May from a year ago, down sharply from a 4.4% year-over-year surge in April, while April to May prices moved up 0.1%.

Although the Fed is talking tough on rates, inflation continues to decline, which could lead to a period of pause in the interest rate path. That could mean a decline in the US dollar and a boost to commodity prices.

Silver demand is increasing with the rise of solar power, according to Bloomberg. Solar still accounts for a small amount of silver demand, but it is growing. The market is expected to account for 14%, up from 5% in 2014. A large part of that growth is coming from China, which is on track to install more panels this year than the United States.

Solar is a “great example of how inelastic demand for silver is,” Gregor Gregersen, from Singapore-based dealer Silver Bullion, said.

Underlying supply and demand effects continue to have an effect on silver prices, despite the precious metal being weighed down by commodity prices.

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