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Asset Watch
Wednesday, July 31, 2024
The FOMC releases its Monetary Policy Statement on July 31, and the committee’s rate-cut guidance could have a material impact on silver. The white metal is sensitive to the movements of the U.S. dollar and real interest rates, so if the FOMC strikes a dovish tone, it could green-light the next silver rally.
Despite the recent correction, on July 25 Sucden Financial said, “We expect silver to gain attractiveness as both a safe-haven asset and a vital industrial metal. We anticipate the price of silver to appreciate by the end of the quarter, surpassing $32/oz in Q3 2024,”
And with future rate cuts key to “fostering sustained inflows,” the team expects the Fed policy to be a major ally in the months ahead.
After struggling near the long-term breakout level of $30, silver has showcased similar behaviour to 2020/2021. Back then, the white metal nearly hit $30 before a sell-off commenced. Then, silver cut below its 5-month moving average (the blue line), found support near its 10-month MA (the yellow line), and rallied to a new high.
This week, silver bounced off the 5-month MA near $28 and has the 2020/2021 closing highs (the horizontal white line) as additional support. However, if a breakdown below the 5-month MA occurs (like in 2020), the 10-month MA is near $26 and could act as a long-term anchor.
If silver repeats its behaviour from 2020/2021, the 10-month MA could be influential and provide traders with a nice buying zone.
The best approach is to monitor the 5-month MA and the horizontal white line. If silver holds above the $28 area and the FOMC ignites more optimism, it may provide the fundamental fuel for the next rally.
If not, you could place your stop-loss order slightly below the 5-month MA, then if it fills you might look to re-enter the position closer to the 10-month MA.
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