Silver price has been finding support in the weakening of the US dollar in addition to optimism over the recovery of the Chinese economy. Ahead of next week’s central banks meetings, investors are eyeing crucial US economic data in the second half of the week.
Fundamentals
Chinese economy
Data released about a week ago showed that the second largest economy had its GDP expand by 4.5% YoY in the first quarter of 2023. While the figure fell short of the government’s target of 5% for the current year, it surpassed economists’ expectations of a 4% increase. Notably, a rebound in property prices and retail consumption, coupled with the steady growth in infrastructure investments and exports, contributed to the reported recovery.
The Chinese economy is often a key driver of silver price, based on its position as the leading consumer of industrial metals worldwide. Indeed, it is one of the factors behind the commodity’s 25% increase in price over the past six weeks.
US economy
The health of the largest economy – the US, and the movements of the US dollar have also been influencing the silver price path. Data released on Tuesday showed that consumer confidence in the US had dropped from March’s 104.0 to 101.3 in April.
Granted, the figure has minimal influence on the Fed’s interest rate decision in May and beyond. However, the lower-than-expected number further exerted pressure on the US dollar while supporting silver price. As is the case with other dollar-priced assets, the commodity tends to move inversely to the value of the greenback.
In the ensuing sessions, more influential economic events are set for release. In particular, preliminary data on US GDP is scheduled for Thursday while the Fed’s preferred gauge of inflation – PCE price index will be released on Friday.
Investors will be assessing the aformentioned data through the lens of the Fed’s decision on interest rate hikes. With the Fed meeting scheduled for the coming week, the focus will be on the probability of a rate cut before the end of the year. Besides, silver price may find support in ECB’s more hawkish stance compared to the Fed.
Silver price prediction
On Tuesday, silver price dropped to a level last recorded three weeks ago. Prior to 4th April, 24.50, which is currently along the 25-day EMA, had been a steady resistance zone for the asset for about a year. Granted, it has recouped some of the previous losses to trade at 25.02 as at the time of writing.
For as long as it continues to trade above the aforementioned level, the bulls will remain in control of the market. This is despite the recent pullback from the one-year high of 26.08.
In the immediate term, the bulls are keen on breaking the resistance at 25.13. If successful, the next target will be at 25.50.
