Silver price edged lower on Tuesday with investors’ focus being on the two largest economies; the US and China. In addition to the underwhelming Chinese economic recovery, eyes are on the Fed interest rate decision set for release on Wednesday.
What’s driving the market?
Underwhelming Chinese economic recovery has been curbing silver price gains in recent weeks. To begin with, data released on Monday showed the contraction of factory activity in the country. The manufacturing PMI came in at 49.2 in April; a decline from the prior month’s 51.9 and economists’ estimate of 51.4.
This comes about two weeks after data showed that the country’s GDP grew by 4.5% in Q1’23; the highest pace in about a year. Even so, it was still below the government’s modest growth target of 5%. Besides, a state media readout from China’s top leaders meeting on Friday, commonly referred to as Politburo, indicated that “internal drivers still aren’t strong and demand is still insufficient”.
At the same time, investors are eyeing the Fed interest rate decision scheduled for Wednesday. The market have already priced in a rate hike of 25 basis points in May’s meeting. However, investors will be looking for cues on the rates’ path in June and beyond.
The bank’s officials may leave their options open as they deliberate on the feasibility of pausing on the aggressive monetary policy. A dovish stance will offer support to silver price amid a weakening US dollar.
Silver price prediction
Silver price began the week by momentarily rising to a two-week high. Indeed, at an intraday high of 25.92, it was less than a dollar short of retesting the one-year high hit on 14th April at 26.10. On Tuesday, it erased the prior session’s gains to trade at 24.68 as at the time of writing.
Even with the decline, it has remained above the 25 and 50-day EMAs as seen on its daily chart. As it is, investors are eyeing the Fed interest rate decision for direction. Subsequently, the range between 24.50 and 25.09 will be worth watching in the short term.
Amid expectations of further interest rate hikes by the Fed, a move below the aforementioned support level will have the bears eyeing the psychologically crucial zone of 24.00. On the upside, the probable rebound may be curbed at 25.35.