Silver Price Forecast: XAG/USD tumbles below $31.00 as US Dollar rallies with eyes on Fed speakers

• Silver price slumps below $31.00, weighed down by US Dollar’s rally.
• Trump’s victory has improved the US Dollar’s long-term outlook.
• Silver price sees more downside towards $29.00.

Silver price (XAG/USD) slides below the key support of $31.00 in Monday’s North American session. The white metal weakens as the US Dollar (USD) rallies on optimism over Republican Donald Trump’s victory in the United States (US) presidential elections.

Trump vowed to raise import tariffs by 10% universally and lower corporate taxes in his election campaign, a scenario that would boost fiscal deficit and inflationary pressures. This would force the Federal Reserve (Fed) to turn hawkish on interest rates. The impact will be favorable for the US Dollar (USD) and bond yields. Usually, higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surges above 105.60. 10-year US Treasury yields soar to 4.37%. This week, investors will be focused on speeches from a slew of Fed officials for fresh interest rate guidance. According to the CME FedWatch tool, the Fed is expected to cut interest rates by 25 basis points (bps) again to 4.25%-4.50% in the December meeting.

Meanwhile, an absence of China’s stimulus package allocation has also weighed on the Silver. Silver, as a metal, has applications in various industries such as power, Electric Vehicles, and mining, etc, and a smaller-than-expected stimulus boost has weakened Silver’s appeal.

On Friday, the National People's Congress (NPC) unveiled a 10 trillion yuan debt package to stabilize economic growth.

"It may be disappointing for those who were expecting the NPC meeting to approve a massive fiscal package, but the expectation is unrealistic because the policy goal is to achieve the GDP growth target and reduce tail risks, not to reflate the economy in any meaningful way," analysts at Macquarie said.

Silver technical analysis

Silver price declines toward the upward-sloping trendline around $29.00, plotted from the February 28 low of $22.30. The white metal weakened after breaking below the horizontal support plotted from May 21 high of $32.50.

The near-term trend of the Silver price has weakened as it establishes below the 50-day Exponential Moving Average (EMA), which trades around $31.60.

The 14-day Relative Strength Index (RSI) slides to near 40.00. A bearish momentum will trigger if the RSI (14) drops below the same.

Silver daily chart