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Silver Price Analysis: Awaiting Powell’s Comments

Today, at 16:30 GMT+3, the Federal Reserve Chairman is scheduled to speak. Market participants are looking for more clarity on the Fed’s plans regarding interest rate cuts following the release of inflation data last Friday.

According to Trading Economics, Fed officials have repeatedly called for caution before cutting rates, and Federal Reserve Board member Michelle Bowman stated that she is open to further rate hikes if progress in combating inflation stalls or reverses.

Powell’s speech will significantly impact many financial markets, including the precious metals market, as lowering interest rates could increase the appeal of gold and silver as “safe haven” assets compared to bonds.

It is important to note that besides the Fed’s monetary policy, the XAG/USD price is significantly influenced by news about the Chinese economy – the largest consumer of silver. The demand outlook remains uncertain, considering that official data for June indicated a second consecutive month of production decline.

Technical analysis of the XAG/USD chart provides more useful information:

→ Silver prices were in an upward trend (indicated by a blue channel), peaking at a multi-year high reached in late May above the $31 per ounce level.

→ The ATR indicator pointed to increased activity during those days. It is likely that major players used the buoyant market, supported by optimistic news, to close long positions.

→ Regardless, silver prices have since started forming a downward trend (indicated by a red colour). The $31 level has shown signs of resistance, and the lower boundary of the blue channel has been broken.

→ The $28.75 level (former resistance) is now showing signs of support.

It is possible that the broad range of $28.75 – $31.00 will become a zone where the silver price finds equilibrium, resilient to various influencing factors, including today’s speech by Powell. Be prepared for volatility spikes.

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