Silver is likely to get under pressure if interest rates fall short of market expectations

14 March 2023 155
Silver is likely to get under pressure if interest rates fall short of market expectations

Silver narrowed its gap with gold yesterday, rising by 6.5%. Silver also plays the role of a defensive asset as banks in the US are going bankrupt. Many analysts are adjusting their forecasts and suggesting that the Federal Reserve System (Fed) will end the cycle of monetary policy tightening.

Just like for gold, the US inflation statistics will be very important for silver today. The CPI inflation rate will determine the market’s sentiment.

According to analysts, the US CPI was likely to rise at a solid pace in February due to high rental prices. Economists are divided in their opinions on whether this data is enough to push the Fed to raise interest rates again next week, after two regional banks have collapsed.

High inflation rates have a negative effect on precious metals, and may bring investors dreaming of a zero rate back to earth. Fed officials haven't said anything on their plans regarding interest rates now that several banks have gone bankrupt. It's possible that the Fed has not made any major changes to its plans, as the inflationary spiral could have a more devastating effect in the future.

The US dollar weakening is another reason boosting the metal's growth. The US dollar index is bouncing upwards today as well, after several sessions of decline. Silver is also expected to pause its growth. The corrective movement is set to gain momentum until it reaches its support levels. The market remains nervous, so volatility is going to be high in the coming sessions.

As shown by the technical analysis, silver has reached its resistance level, not being able to rise above it for now. The nearest of the last year's growth wave Fibonacci retracement level of 0.5 could be the next target. Applying the Fibonacci levels of the growth wave over the recent days to the chart, one can see the two nearest Fibonacci retracement levels of 0.236 and 0.382. The second level (0.382) coincides with the Fibonacci retracement target of the whole growth wave. Let's consider it as the main target.

The downside target will be at $21.1. Stop-loss could be set at the renewal of yesterday's highs of $22.0.

A decline in the silver price:

Take profit – 21,1

Stop-loss – 22,0

This content is for informational purposes only and is not intended to be investing advice.

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