Silver price forecast amid concerns over the likelihood of a soft landing

Silver price has extended gains from the previous session as the financial markets digest May’s Fed interest rate decision and subsequent statement by the bank’s Chair – Jerome Powell. Even so, a strong US dollar and rising Treasury yields have continued to curb its upward movement.

Fundamentals

In his comments after the interest rate decision. The Fed Chair indicated that there is a “good chance” for a soft landing even with the aggressive tightening of the monetary policy. These remarks comes amid the growing concerns over a probable recession.

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According to the former Fed Vice Chair for Supervision, Randal Quarles, it is unlikely that the central bank will bring back the strong labor market and high inflation back to equilibrium with a soft landing. Earlier in Wednesday’s session, the US Treasury Secretary and former Fed Chair, Janet Yellen echoed these remarks. She stated that the Fed needed to be “skillful and also lucky” to have a soft landing in their aggressive policy tightening.

Similar to other precious metals, an environment of higher interest rates is bearish for silver price. At the same time, it is a conventional safe haven during times of economic uncertainties. These two opposing forces explain why silver price is on a rebound after the Fed increased rated by the expected 50 basis points.

Besides, in his statement, Powell noted that a hike of 75 basis points, which some analysts have suggested, is “not something that the committee is actively considering.” The stance was rather dovish; an aspect that eased the US dollar’s rallying while boosting the precious metal.  

Silver price technical analysis

At the beginning of the week, silver price extended its losses to trade at its lowest level in three months at 22.15. At that  level, it was in the oversold territory with an RSI of 25; having been in the red for ten consecutive sessions.

The precious metal has since bounced off those lows to 22.96 as at the time of writing. Earlier on Thursday, it surged to 23.31 before pulling back. Even with the rebound, it remains below the 25 and 50-day exponential moving averages.

In the ensuing sessions, I expect silver price to be subject to curbed gains. In particular, it will likely continue to find resistance at Thursday’s intraday high of 23.31 as the bulls seek to gather enough momentum to boost it further. Above this level, 23.90 will be a resistance level worth looking out for. On the lower side, 22.50 will likely remain a steady support zone.