Silver Price Forecast: XAG/USD drops below the 50-DMA on risk-on impulse

• Silver stumbles on Tuesday, despite a broad US dollar weakness.
• Fed officials kept to the hawkish script, opening the door for further rate hikes.
• US T-bond yields remain heavy, even though market participants expect another 75 bps rate hike by the Fed.

Silver price extends its losses to five consecutive days after reaching a fresh three-month high at $21.23 a troy ounce. Since then has lost 8.50% due to overall US dollar strength, underpinned by elevated US T-bond yields.

At the time of writing, the XAG/USD is trading at $19.45, after hitting a daily high during the Asian session at around $19.71, before printing the day’s low of $19.19.

Investors sentiment improved as US equities bounced off the lows and trade positive. Earlier, the mood was sour, on fears spurred by expectations of worldwide economic slowdown and the Fed’s aggressive tightening, but stocks are getting a respite, despite that fundamentals have not changed.

During the last couple of days, Fed officials maintained their hawkish rhetoric, with Cleveland’s Fed President Mester saying that the Fed will need to keep raising rates until they see clear signs that inflation is indeed approaching the Fed’s goal. Meanwhile, Chicago’s Fed President Charles Evans said that he expects the Federal funds rate (FFR) to peak at around 4.50% in early 2023.

Elsewhere, Fed’s Vice Chair, Lael Brainard, said, “monetary policy will be restrictive for some time to ensure that inflation moves back to target over time.” She confirmed that the pace and size of further moves would be data-dependent.

In the meantime, the US Dollar Index, a gauge of the greenback’s value vs. a basket of peers, edges down 0.39%, below 113.000 for the first time in the week. Additionally, US Treasury bond yields are easing from weekly highs, with the US 10-year bond yield at 3.890%, down seven bps. Even though, US bond yields and the greenback remain on the backfoot, the white metal has been unable to capitalize.

Early morning, the International Monetary Fund reported that the US economy would grow at 2.7% in 2023, below the 2.9% projected in July. According to the IMF chief Economist Pierre-Olivier Gourinchas, “The worst is yet to come, and for many people, 2023 will feel like a recession.”

What to watch

The US economic docket will feature Fed speaking alongside the Producer Price Index (PPI) for September on Wednesday,

Silver Key Technical Levels