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Silver Prices Hit 2-Year Highs As Weak Dollar Fundamentals Provide Propulsion

Silver prices hit two-year highs of $27.33 on Thursday before declining slightly to trade at $27.05 at 08.00 UTC. The commodity is on a scintillating run, having gained for the last five consecutive trading sessions. Like gold, silver’s rally is largely attributed to market sentiment around US interest rate cuts. Furthermore, there has been a notable improvement in industrial activity in the United States, Europe and China. Silver is used in various processing and manufacturing industries. Hence, a spike in industrial production often results in increased demand.

The US dollar has weakened this week, amidst a blend of soft and weak US macroeconomic data. On Wednesday, the March S&P Global Services PMI met the forecast estimate, coming in at 51.7.  The ADP Nonfarm Employment Change figures, which measures the change in private sector nonfarm jobs, read 184,000, exceeding the forecast 148,000.

However, the ISM Non-Manufacturing PMI came in at 51.4, missing the forecast 52.8. Similarly, the ISM Non-Manufacturing Manufacturing prices reading declined from 58.6 in February to 53.4 in March, falling below the forecast 58.4.  Later on Wednesday, Federal Reserve Chairman Jerome Powell issued a statement that did little to provide support for the dollar.

While underlining the Fed’s focus on bring inflation rate down to 2%, Powell reiterated that recent data have proven that the US economy is strong, which could delay the rush to trim interest rates. Nonetheless, he did not rule out the three rate cuts talk. Another Fed member, Atlanta’s Raphael Bostic had a straightforward hawkish tone, stating that the first cuts may not come until the fourth quarter of the year.

Technical analysis

Silver price has been rejected at 27.24, but the RSI indicator signals control by the buyers. That could build the momentum to stay above the 27.00 pivot mark, which could breach the 27.24 resistance and potentially test 27.40 in extension. However, a move below 27.00 will favour control by the sellers, with support at 26.81. Extension of control by the sellers at this point could see a move to test 26.55.