Silver Price Forecast: XAG/USD reclaims $22.00 amid a hawkish Fed projecting rate hikes in 2022

• As the Asian session begins, silver advances some 0.14%.
• Fed announces a faster bond taper, and its policymakers project three interest rates hikes by 2022.
• The US central bank projects a 4.0% growth next year, up from September’s 3.8% projections.
• XAG/USD Technical Outlook: Has an upward bias, but faces strong resistance at the 200-hour SMA.

Silver (XAG/USD) advances sharply during the day as the New York session winds down, up some %, trading at $22.02 at the time of writing. On Wednesday, the Federal Reserve announced a faster bond-taper beginning in January of 2022 and, according to the dot-plot, could hike three times in 2022, fulfilling the market’s expectations.

The Federal Reserve revealed an increase in the pace of reducing its bond purchasing program by $30 Billion, double the amount initially agreed at the November meeting. Additionally, it dropped the word “transitory” from its monetary policy statement, referring to inflation as exceeding the bank’s 2% target “for some time.”

Fed’s Chair Jerome Powell press conference remarks

Jerome Powell held his traditional press conference after the Fed released its monetary policy statement. He said that “the economy no longer needs increasing amounts of policy support.” He commented that the pace of inflation is “uncomfortably high” and expressed that the Fed is making fast progress towards achieving maximum employment in his point of view.

The Summary of Economic Projections (SEP) was released in addition to the monetary policy statement. Fed policymakers expect inflation to run at a 2.6% pace in 2022, an increase over 2.2%, projected in September, but then fall to 2.3% in 2023 and 2.1% in 2024. Concerning the labor market, the Unemployment Rate is projected to fall to 3.5% in 2022.

Regarding the Federal Fund Rate (FFR), the Federal Reserve Board members expect it to end at 0.90% in 2022, meaning the US central bank would hike three times. By 2023, they expect the FFR at 1.6%, and in 2024 at 2.1%.

Concerning the US economic Outlook, Fed policymakers projected a 4% growth in 2022, up from the 3.8% in September.

Market reaction

XAG/USD initially reacted downwards, reaching a daily low at $21.40. However, the move was faded, bouncing off and rallying towards the 100-hourly simple moving average (SMA) at $22.00, a jump of $0.66 despite the hawkish pivot by the Fed.

XAG/USD Price Forecast: Technical outlook

At press time, silver is trading above the 50 and 100-hour simple moving averages (SMAs). In the near term, the bias is bullish, but a break above the 200-hour SMA at $22.21 might clear the way for an upward move towards the December 13 high at $22.40, followed by the December 6 high at $22.59.

On the flip side, failure at the 200-hour SMA could lead to further losses. The first support would be the 50-hour SMA at $21.98, followed by the daily pivot point at $21.64 and the S1 daily pivot at $21.58.