Silver Price Forecast: XAG/USD jumps to near $29 over Middle East woes, Fed policy in focus

• Silver price climbs to near $28.80 on multiple tailwinds.
• Widening Middle East conflicts have improved the Silver price’s safe-haven appeal.
• Investors see the Fed delivering hawkish guidance on interest rates.

Silver price (XAG/USD) jumps to near a weekly high around $28.80 in Wednesday’s North American session. The precious metal strengthens on growing fears of widening Middle East conflicts and firm speculation that the Federal Reserve (Fed) will deliver dovish guidance on interest rates after leaving them unchanged in the range of 5.25%-5.50%.

Israeli air strike on Tehran in which Hamas leader Ismail Haniyeh was killed has prompted fears of an all-out war between Israel and Iran. Historically, escalating geopolitical tensions improve the safe-haven appeal of precious metals.

Meanwhile, investors await the Fed’s monetary policy, which will be announced at 18:00 GMT. Market experts see the Fed endorsing rate cuts in September as inflation has returned on the path that leads to the bank’s target of 2%. Also, increasing cracks in the United States (US) labor market strength would be a tailwind for rate cuts.

In the early American session, the US ADP released a weaker-than-expected Employment report for July. The report showed a weak labor demand in the private sector as payrolls were lower at 122K than estimates of 150K and the prior release of 155K. Weak employment data has weighed heavily on the US Dollar and bond yields.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, dips below 104.00. 10-year US Treasury yields slide below 4.10%. Lower yields on interest-bearing assets reduce the opportunity cost of investment in non-yielding assets, such as Silver.

Silver technical analysis

Silver price attempts to extend its recovery above the crucial resistance plotted from July 13 low at $28.66 in a four-hour timeframe. The white metal moves higher and aims to stabilize above the 50-period Exponential Moving Average (EMA), which trades around $28.60.

The 14-period Relative Strength Index (RSI) jumps above 60.00. A bullish momentum would trigger if it sustains above the same.

Silver four-hour chart