Silver price: Here’s what to expect with Fed minutes in focus

Silver price remains range-bound ahead of the FOMC meeting minutes set for release on Wednesday. As at the time of writing, it was down by 0.37% at $21.71. Later in the week, the market will also be reacting to the US GDP and PCE price index.

Fed’s monetary policy

As investors digested the Fed interest rate decision released at the beginning of February, silver price rallied to a level last recorded in April 2022. The surge was largely founded on expectations that the Fed will slow on its interest rate hikes in coming months. While the Fed Chair insisted on the need to continue increasing interest rates, the market appeared to run with his remarks that “the disinflationary process has started”.

However, silver price has been on a decline since then as subsequent US economic data pointed to a resilient economy. In addition to a strong US job market, the Labor Department indicated that consumer prices surged at a higher-than-expected pace in January. The figures signalled that the Fed still have a long way to go to ease inflation to its 2% target.  

Investors await the FOMC meeting minutes on Wednesday for further cues on the direction that the interest rate hikes will take. Analysts expect the officials’ remarks to reiterate the central bank’s hawkish stance.

An environment of high interest rates will likely continue to curb silver price probable gains. Even so, similar to other precious metals, it may benefit from its status as a safe haven as the year unfolds. This thesis is founded on the forecast that the US economic growth may slow and force the Fed to ease on its rate hikes.

Chinese demand

Even with the recorded pullback, silver price has continued to find support in the optimism regarding China’s economy. Notably, the Asian country is the leading consumer of industrial metals.    

On Monday, the People’s Bank of China (PBOC) left its benchmark lending rates unchanged for the 6th consecutive month at 3.65%. The central bank has continued to assess the Chinese economy to determine if it needs further stimulus to boost growth.

Silver price outlook

For about a week now, silver price has been rather range-bound as investors await a fundamental catalyst. In the short term, that is expected to appear in the form of the FOMC meeting minutes. As seen on its daily chart, it continues to find resistance along the long-term 200-day EMA. Besides, it is also trading below the medium-term 50-day EMA.

In the short term, the range between the 200-day EMA at 21.95 and the support at 21.50 will be worth watching. Hawkish remarks in the FOMC minutes may give the bears an opportunity to retest the psychologically crucial level of 21.00. On the flip side, the potential gains will likely be curbed at 22.40.

silver price
silver price

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