Silver Price Forecast: XAG/USD slumps below $20.00 on risk aversion

• Silver price extends its losses below the 100-day EMA on risk-aversion.
• Fed’s aggressive tightening cycle and increasing geopolitical tensions bolstered the US dollar.
• US central bankers expressed that the Fed needs to be restrictive, with rates around 4.50% in early 2023.
• Silver Price Forecast: If it surpasses the 20-day EMA, it could pave the way to $19.00.

Silver price tumbles below the 100-day EMA, down for four consecutive days courtesy of a risk-off impulse sparked by the US central bank expectations for further tightening, tensions arising between the US-China chip embargo, and the escalation of the Russia-Ukraine war. Therefore, traders seeking safety kept the greenback in the driver’s seat. At the time of writing, the XAG/USD is trading at $19.59 a troy ounce, down by 2.50%.

US equities closed in the red, extending their losses for the fourth consecutive day. The lack of US economic data released on Monday keeps market players leaning on Federal Reserve speeches led by Vice-Chair Lael Brainard and Chicago’s Fed President Charles Evans.

Brainard said that even though the US economy decelerated “more than anticipated,” she added that some sectors remain lagging behind the effects of monetary policy. She commented that monetary policy needs to be restrictive for some time to reassure that inflation would get back under the Fed’s objective.

Earlier, Charles Evans said that the US central bank might be able to slow down inflation “while also avoiding a recession.” He estimates that the Federal funds rate (FFR) will peak at around 4.5% early in 2023 and remain higher for longer.

In the meantime, the greenback appreciated during the day on the escalation of the Russia/Ukraine conflict, as shown by the US Dollar Index, up 0.35%, at 113.145. Also, US semiconductors embargo on China is expected to spur some retaliation from one of the largest economies in Asia.

It is worth noting that the US bond market is closed, though it was not an excuse for the precious metals to begin the week on the wrong foot. However, the US 10-year bond yield is at 3.961%, while US 10-year Treasury Inflation-Protected Securities (TIPS) would open on Tuesday, yielding 1.62%.

All that said, most traders are expecting US inflation data to be released on Thursday. Expectations on the monthly reading are at 0.2%, above the previous reading, while on an annual based, they are at 8.1%, on the back of falling energy prices. Concerning core inflation, which strips food and energy, the MoM is expected to slow by 0.4%, less than August’s, while the year-over-year is estimated to jump by 6.5%, higher than the 6.3% in the previous month.

Silver Price Forecast

The XAG/USD dropped below the 100-day EMA at $19.95, extending its losses, nearby the 20-day EMA at $19.53. It should be noted that the Relative Strength Index (RSI) is getting towards the 50-midline, which, once broken downwards, would signal that sellers are gathering momentum. Then, the XAG/USD first support would be the 20-day EMA previously mentioned, followed by the 50-day EMA at $19.40, which, once cleared, could open the door for a re-test of the September 28 daily low at $17.97.