Silver price hit a fresh one-year high on Wednesday amid a weakening US dollar. Indeed, signs that the Fed’s efforts are slowing the labor market may further boost the asset. Investors are now keen on the nonfarm payrolls set for release on Friday.
As is the case with other dollar-priced assets, silver price tends to move inversely to the value of the US dollar. This is based on the fact that a weakening US dollar makes the metal less expensive for buyers holding foreign currencies. Indeed, the inverse correlation has been one of the commodity’s influential factors in recent years.
In September 2022, the dollar index hit its highest level in about two decades on the back of the aggressive interest rate hikes by the Federal Reserve. Fast forward to 2023 and the currency has been weakening as investors bet the Fed’s efforts are bearing fruits and that it may further ease on its rate hikes.
In the current week, the US dollar and silver price by extension are reacting to the scheduled economic data. On Monday, the released data showed that US manufacturing activity continued to contract.
Besides, JOLTs job openings in February dropped below 10 million for the first time in close to two years. Signs that the US labor market is slowing has further contributed to the dollar weakening. With nonfarm payrolls in focus, additional pressure on the currency is set to further boost silver price.
Furthermore, the commodity continues to find support in the recovery of the Chinese economy. Data released on Monday showed the expansion of the country’s manufacturing sector with a PMI of 50. Granted, it missed the analysts’ estimate of 51.7 and fell short of the prior month’s 51.6. Caixin manufacturing and services PMIs are set for release on Thursday.
Silver price prediction
Earlier on Wednesday, silver price rose to a fresh one year high at 25.13. Indeed, Tuesday was the first time for the metal to trade at 25.00 since 21st April 2022. As at the time of writing, it had pulled back by 0.32% to 24.94.
About a week ago, silver price formed a golden cross after the 25-day EMA crossed the 50-day EMA to the upside. Indeed, based on both the fundamentals and technicals, I expect the asset to remain on an uptrend in the short term.
In the immediate term, the resistance level at 25.09 remains one worth watching. Having entered the overbought territory with an RSI of 75, it may pullback to find support at 24.50. Below that level, the bears will have an opportunity to retest the lower support zone of 24.00. On the upside, further weakening of the US dollar will have bulls in the silver market eyeing 25.35.