Silver market: Jerome Powell’s speech expected to bring some clarity in the markets

Silver price edged higher on Tuesday after hitting a two-month low in the previous session. With the uncertainties in the financial markets, investors are keen on Jerome Powell’s speech later in the day.

Confusion in the market

Since late last year, silver price has found support in the observable shift in mentality regarding the positioning of the US central bank. In particular, the October CPI numbers released on 10th November signalled that US inflation had peaked. Subsequently, silver price was on an uptrend as the US dollar and Treasury yields eased.

Fast forward to last week when the market interpreted the Fed interest rate decision as a sign that the central bank is nearing the end of its steady interest rate hikes. In fact, this mood was fanned by Jerome Powell’s remarks acknowledging that “the disinflationary process has started”.

Interestingly, the US nonfarm payrolls data released on Friday appear to have brought a twist to the embraced narrative; erasing silver price gains recorded over the past two months. The jobs report showed that the US economy added over 500,000 jobs in January compared to the expected 185,000.

The divergent numbers have yielded some confusion in the financial markets; which explains the recent plunge in silver price. On the one hand, it appears evident that inflation is easing.

Even so, the labor market remains strong and the economy seems to be more resilient than expected. As such, there still may be more room for the Fed to approve additional rate hikes. The latter setup would weigh on silver price as Treasury yields and the US dollar rebounds. In the short term, investors are keen on Jerome Powell’s speech on Tuesday for cues on the bank’s outlook of the market.   

Silver price prediction

Last week on Thursday, silver price rallied to a level last recorded on 22nd April 2022 at 24.65. With a span of three months, the dual status metal had rallied by over 30%.

While the bulls remained in control into 2023, the asset was largely range-bound between 24.50 and 23.00 since the beginning of the year. However, following the past event-packed week, it pulled back to a two-month low on Monday at 22.17. Granted, it has eased on its decline on Tuesday; trading up by 0.5% at 22.36 as at the time of writing.

With Jerome Powell’s speech in focus, silver price will likely record subtle movements with 22.00 being a support zone worth watching. A hawkish tone from the Fed Chair may push the asset lower to find support at 21.47.  

On the flip side, reiteration that “the disinflationary process has started” may yield a rebound to 23.15. Even so, I am cautiously bullish on silver price. As such, 23.50 will be a resistance zone worth watching in the ensuing sessions.

silver price
silver price

Leave a Reply

Your email address will not be published.