Currently trading at around ~33.0865 per troy ounce, silver trades higher in today’s session on a weaker dollar and renewed safe-haven demand.
XAG/USD: Key Takeaways
- With the dollar continuing to weaken, XAG/USD trades ~2.25% higher today, trading above $33 for the first time since May 6th.
- The recent downgrade of the United States’ credit rating has boosted safe-haven demand, with questions asked over escalating US national debt and rising interest rate costs.
- Increased US rate cut bets are also benefiting silver pricing, with markets increasingly anticipating two interest rate cuts in 2025.
XAG/USD: Silver gains on U.S. debt downgrade
With the market having time to digest Moody’s report from Friday, investor confidence has made way for renewed safe-haven demand, ultimately benefiting precious metal pricing.
Cited at $36 trillion by Moody’s, the outstanding budget deficit has proven a cause for concern for American investors, with weakness in public finances weighing negatively on the dollar and US bond markets.
In the face of this, Trump continues to seek congressional approval of his proposed “big, beautiful” tax bill, representing the latest Trump administration proposal. With seemingly no end to radical policy changes, markets are understandably somewhat mixed about the future of the US economy, with traditional safe-haven assets reporting increased inflows.
CME FedWatch, CME Group 20/05/2024
XAG/USD: Dollar weakness extends silver rally
Snapping a 4-week winning streak and now on pace for its worst week since early April, the U.S. dollar (DXY) continues to weaken amid evolving monetary policy expectations and general market uncertainty on the US economy.
Choosing to maintain rates in their most recent meeting, recent commentary from the Federal Reserve has markets increasingly anticipating two rates in 2025, coupled with data showing inflation is cooling faster than expected.
This will be welcome news for President Trump, who recently clarified his preference for lower interest rates.
As a non-yielding asset, a more hawkish Federal Reserve is likely to benefit stores of wealth such as silver, with the opportunity cost of holding precious metals becoming comparatively lower.
A chart showing the recent price action of XAGUSD & DXY. OANDA, TVC, TradingView, 20/05/2024
XAG/USD technical analysis
- Acting as a significant resistance level, silver broke above $33 for the first time since May 6th in today’s session, paving the way for further upside. If the rally is to continue, bulls will likely target ~33.18832.
- Current readings suggest a growing trend strength when using the 14-period ADX on the daily timeframe. Trading at a ~5.30% discount from all-time highs, further upside remains viable.
