Silver price surged to the highest level since June this year as the market reflected on the change of tune by the Federal Reserve Chairman. It also soared as worries about China’s lockdowns eased a bit. The XAG/USD price was trading at $22.30, which was about 27% above the lowest level this year. Other precious metals like gold and platinum also rebounded.
Jerome Powell’s dovish tone
Silver prices continued the upward trend after Jerome Powell confirmed what most analysts were expecting. In a speech, he said that the Fed would start reducing the size of its interest rate hikes in the coming meeting. This view was in line with what minutes published last week showed. Also, it was in line with what most central bank officials said this month following the release of encouraging American inflation data.
Silver and other precious metals tend to do well in a period of low-interest rates or when the Fed is a bit dovish. Analysts expect that the bank will now hike interest rates by 0.50% in December after it hiked by 0.75% in the past four straight meetings. They also believe that the bank will then shift to 0.25% increases in the first quarter of 2023.
Silver is also an industrial metal that does well in periods when the economy is booming. Earlier this week, the XAG/USD price retreated amid huge Covid-zero protests in China. It then rebounded as investors predicted that China will start to ease these lockdowns to ease further lockdowns. China is the biggest buyer of silver and other industrial metals.
Silver price forecast
The daily chart shows that the XAG/USD price has made a strong recovery in the past few days. It managed to move above the important resistance at $22.25, which was the highest point on November 15. Notably, it moved above the 50-day and 200-day moving averages and a golden cross is approaching fast. This cross happens when the two MAs make a crossover. It also formed an inverted head and shoulders pattern.
The Stochastic Oscillator moved to the overbought level while the price is at the 50% Fibonacci Retracement level. Therefore, silver will likely continue rising as buyers target the next key resistance at $25. A drop below the support at $21.5 will invalidate the bullish view. This forecast is in line with my previous estimate.
