Silver Prices Plummet as Fed’s Hawkish Stance Weighs on Market
Spot silver prices experienced a significant decline on Tuesday, dropping more than 2% and falling below the $29.00 per ounce mark. FXStreet analyst Christian Borjon Valencia provided a technical analysis of the silver price trend in his latest article.
Valencia attributes the drop to hawkish comments from Federal Reserve Governor Michelle Bowman, which caused silver prices to plunge below the 50-day moving average. Bearish technical indicators are evident, and the Relative Strength Index (RSI) suggests further downside for silver.
Spot silver closed down 2.3% at $28.89 per ounce.
Governor Bowman emphasized the need to maintain the current policy rate to combat inflation, indicating that inflation in the United States is expected to remain high for a period. She also stated that no rate cuts are anticipated for this year, and further interest rate increases are possible if necessary. Bowman's economic forecast postpones previously anticipated rate cuts to 2025, reinforcing her hawkish stance among current Fed policymakers.
Valencia noted that Bowman's comments strengthened the U.S. dollar, leading to the sharp decline in silver prices. The U.S. Dollar Index closed up 0.13% at 105.66 on Tuesday.
From a technical perspective, Valencia observed that last week, silver prices formed a "bearish engulfing" chart pattern, suggesting potential for further declines. The RSI indicates a bearish trend, favoring sellers. Valencia predicts that silver could continue its downward trend, with the first support level at the May 18, 2021 high of $28.74 per ounce, followed by the June 10, 2021 high of $28.28 per ounce. Critical support lies below at $28.00 per ounce, with the 100-day moving average at $26.82 per ounce.
Conversely, if silver resumes its uptrend, the next resistance level would be the 50-day moving average at $29.16 per ounce. Beyond this, the next targets would be the June 7 high of $31.54 per ounce, followed by $32.00 per ounce, and the year-to-date high of $32.51 per ounce.
According to Economies.com, if silver prices continue to fall below $29.30 per ounce, the next target for short-sellers could be $28.55 per ounce.
