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Silver (XAG/USD) ended its four-day winning streak on Monday as traders paused after a 5.55% rally last week. The metal is currently trading below key 50- and 200-day simple moving averages (SMAs) at $24.50, with a stronger U.S. Dollar (USD) limiting its upward potential. The 24.50 level acts as a critical resistance, and a break above this could signal renewed bullish momentum. However, the USD's strength, driven by lingering Fed rate hike expectations, continues to weigh on silver's performance.
The Fed's upcoming policy decisions remain a key driver for precious metals. While recent data has eased some rate hike bets, the central bank's stance on inflation will determine the USD's trajectory. For traders, the interplay between the USD and XAG/USD is critical, as a weaker USD typically boosts demand for non-yielding assets like silver. Technical indicators suggest a potential for a short-term correction if the 24.50 level holds, but a breakdown below the 200-day SMA could trigger further bearish pressure.
Looking ahead, investors should monitor the Fed's upcoming economic projections and inflation data. A shift toward rate cuts could weaken the USD and support silver prices. Conversely, any hawkish signals from the Fed could reinforce the USD and cap silver's gains. Key support levels to watch include $23.50 and $22.70, while resistance remains at $24.50 and $25.50. Positioning in options markets and physical silver demand from the Gulf region may also influence short-term price action.
