Silver Price Forecast: XAG/USD surged past $26.00, stays firm on risk-aversion

• Silver price pierces the $26.00 figure but fails to crack the YTD high of $26.08.
• A dovish perceived Federal Reserve underpinned the white metal.
• XAG/USD remains in a solid uptrend despite overbought RSI readings; a pullback is possible.

Silver price rallied but remained shy of cracking the previous year-to-date (YTD) high of $26.08, with XAG remaining supported by buyers keeping the white metal trading nearby the $26.00 figure. Data from the US flashed the labor market is easing amidst the ongoing US banking turmoil, which weighed on market sentiment. The XAG/USD is trading at $25.96 a troy ounce, up 1.40%.

Silver price nears YTD highs as Fed policy boosts uptrend, but overbought RSI signals potential pullback

The rise in the precious metals segment was sparked by traders seeking safety, amidst an ongoing deterioration in the United States (US) economy, alongside falling US Treasury bond yields. Reflection of the latter is investors seemed to price in rate cuts by the Federal Reserve in 2023.

On Wednesday, the Fed increased rates to the 5.00% - 5.25% area, 25 bps up from its March meeting level. It signaled that it would be data-dependent while removing “hawkish”  language from its monetary policy statement.

Even though the Fed’s decision was perceived as dovish, when Fed Chair Jerome Powell was asked about rate cuts, he said, “Would not be appropriate to cut rates, given our view that inflation will take some time to come down.”

In the meantime, the labor market continued to ease, as shown by Initial Jobless Claims for the week ending on April 29, jumping above the estimated 240K and coming at 242K. Continuing Claims edged down by 38K, to 1.81 million, in the week ending on April 22.

In other data, the US Balance of Trade deficit narrowed in March as Exports increased, as the US Commerce Department reported.

Ahead of the week, the US economic calendar will include the Nonfarm Payrolls for April, which is expected to show 180K jobs added to the economy - less than the previous month’s 236K. The report will also include the Average Hourly Earnings, which are expected to remain at 0.3% MoM, and the Unemployment Rate, which is predicted to be 3.6%.

XAG/USD Technical Analysis

The XAG/USD remains in a solid uptrend, despite falling to crack $26.08, the YTD high. However, the high readings of the Relative Strength Index (RSI) indicator in the overbought territory could refrain Silver traders from opening new positions, as price action looks overextended. That could pave the way for a mean reversion toward the 20-day EMA, which intersects with the $25.00 figure, as buyers take a respite to lift XAG/USD to higher prices.