Silver The price extended the previous session’s gains as financial markets digest the Fed’s May interest rate decision and subsequent statement from bank chairman Jerome Powell. Even so, a strong US dollar and rising Treasury yields continued to dampen its upward movement.
In his comments after the interest rate decision. The Fed Chairman indicated that there is a “good chance” of a soft landing even with the aggressive tightening of monetary policy. The remarks come amid growing concerns over a likely recession.
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According to former Fed vice-chairman in charge of supervision, Randal Quarles, it is unlikely that the central bank will bring the strong labor market and high inflation back to equilibrium with a soft landing. Earlier in Wednesday’s session, US Treasury Secretary and former Fed Chair Janet Yellen echoed those remarks. She declared that the Fed had to be “skillful and also lucky” to have a soft landing in its aggressive policy tightening.
Similar to other precious metals, a higher interest rate environment is bearish for the price of silver. At the same time, it is a conventional refuge in times of economic uncertainty. These two opposing forces explain why the price of silver is rebounding after the Fed raised its rating by the expected 50 basis points.
Additionally, in his statement, Powell noted that a 75 basis point hike, suggested by some analysts, is “not something the committee is actively considering.” The position was rather accommodating; an aspect that dampened the rally in the US dollar while boosting the precious metal.
Silver price technical analysis
At the start of the week, the price of silver extended its losses to trade at its lowest level in three months at 10:15 p.m. At this level, it was in oversold territory with an RSI of 25; having been in the red for ten consecutive sessions.
The precious metal has since bounced off those lows at 22.96 at the time of writing. Earlier Thursday, it jumped to 23.31 before falling back. Even with the rebound, it remains below the 25 and 50 day exponential moving averages.
In the following sessions, I expect the price of silver to be subject to limited gains. In particular, it will likely continue to find resistance at Thursday’s intraday high at 23.31 as the bulls seek to muster enough momentum to boost it further. Above this level, 23.90 will be a resistance level to watch. On the downside, 22.50 will likely remain a stable support zone.
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