Silver price forecast with Fed interest rate decision on the horizon

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Silver The price starts the new week on a downtrend amid heightened prospects for aggressive interest rate hikes by the Federal Reserve. Indeed, all eyes are on the Fed’s interest rate decision, which is scheduled for release on 4e May.

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Drivers for the new week

Financial markets have priced in a 50 basis point rate hike as the US central bank strives to reduce inflation which is currently at its highest level in four decades. However, as the year progresses, investors expect even more policy tightening from the Fed. Notably, a higher interest rate environment tends to weigh on precious metals while strengthening the US dollar.

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Indeed, the greenback has been on an uptrend for nearly three months. In particular, the psychological $100 level has been a stable support zone for the dollar index since mid-April. Prior to that, it had been an evasive zone since May 2020. It ended Friday’s session at $103.21. Rising Treasury yields have also increased the opportunity cost of holding the non-performing asset.

In addition to the Fed meeting, investors will also be interested in JOLT jobs on Tuesday and non-farm payrolls on Friday. Additionally, based on its status as both an industrial metal and a precious metal, the price of silver will react to the ISM manufacturing PMI due out on Monday.

Silver Price Prediction

Over the past two weeks, the price of silver has fallen; drop of approximately 12.48%. In fact, since the start of the Russian-Ukrainian war in late February, last week marked the first time the precious metal broke below the constant 24:00 support. It ended the week at 10:74 p.m.; its lowest level since 7e February.

On a daily chart, it is trading below the 25-day and 50-day exponential moving averages. Furthermore, it is in oversold territory with an RSI of 26. Based on these technical indicators, coupled with the fundamentals, I expect the downtrend to continue into the new week.

Silver price will likely hover around 22.76 as the market enters the new week as bulls attempt to retest the psychological level of 23.00. It may register a corrective bounce to find resistance at 23.14 before falling further. On the lower side, 22.24 and the lower level of 21.85 will be support levels to watch.

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