In a week marked by significant economic and geopolitical developments, the financial markets displayed a notable shift in sentiment. As the world braces for potential policy announcements from the United States, President Donald Trump is poised to unveil his reciprocal tariff plan ahead of a meeting with Indian Prime Minister Narendra Modi on Thursday. Meanwhile, silver prices maintained their grip near $32.30, buoyed by the weakening US Dollar and prevailing uncertainties surrounding Trump's tariff strategy.
The recent release of the US Consumer Price Index (CPI) data for January has fueled expectations for the Federal Reserve's continued adherence to its "higher for longer" interest rate policy. Despite the hot CPI figures, the US Dollar Index (DXY) experienced a decline, reaching near 107.50, influenced by a risk-on market mood fostered by promising Russia-Ukraine peace negotiations. Concurrently, the Pound Sterling capitalized on this improved sentiment, benefiting from the upbeat UK economic data, which revealed a 1.4% annual growth rate in the fourth quarter.
The silver market has been closely observing these developments. Despite heightened inflationary pressures, the US Dollar has exhibited signs of weakness, falling back inside the 40.00-60.00 range on the 14-day Relative Strength Index (RSI), indicating a lack of bullish momentum. This decline in the greenback has contributed to silver's steady performance, as it holds gains above the 50-day Exponential Moving Average (EMA), trading around $30.95.
Interestingly, silver's price trajectory has been influenced by geopolitical factors as well. During the onset of the Russia-Ukraine conflict, silver experienced a robust rally. Currently, with leaders from both nations agreeing to peace talks after a prolonged three-year war, market sentiment has shifted towards risk-on. This sentiment has led to unabated selling pressure on the US Dollar, further supporting silver's position near critical resistance levels.
As traders navigate this complex landscape, silver faces immediate resistance at $32.50, a level established from the December 9 high. Any upward momentum will need to contend with this resistance before potentially testing higher thresholds. Conversely, the upward-sloping trendline from the August 8 low of $26.45 serves as a crucial support level for silver around $29.50.
In parallel, gold prices have also been on an upward trajectory, resuming their rally and nearing $2,920 at the time of writing on Thursday. The precious metal's resurgence reflects broader market trends and investor sentiment influenced by geopolitical developments and economic data releases.
Amidst these dynamics, market participants are keenly observing potential policy shifts from the Federal Reserve. The central bank is expected to maintain interest rates within the current range of 4.25%-4.50% for an extended period, aligning with expectations of prolonged inflationary pressures and economic recovery efforts.