Silver price analysis amid rising demand outlook

Silver price is in consolidation mode after the profit-taking mood that marked the start of the week. Uncertainties had bolstered the precious metal to a fresh 13-year high of $37.24 in the past week. However, the Israel-Iran ceasefire has improved risk appetite; erasing the recent silver price gains. 

Even so, a bullish demand outlook and a weaker US dollar have held the asset steady above the previously strong resistance zone of $35. At the time of writing, it was trading at $35.89. In the ensuing sessions, the focus will be on the market sentiment and prospects of a July rate cut by the Federal Reserve.   

Silver price consolidates as market sentiment shifts

Geopolitical tensions in the Middle East heightened safe haven demand; boosting silver price to a fresh 13-year high a week ago. However, twelve days after Israel’s surprise attack on Iran’s nuclear and military facilities, the two parties have agreed to a ceasefire.  

At the start of the ceasefire, the two countries appeared to dismiss it by firing non-lethal rockets at each other. However, the deal now seems to hold; easing the demand for precious metals and other safe-haven assets. With these developments, the fear & greed index, which tracks the mood in the financial markets, is now at a greed level of 56 compared to last week’s neutral of 54. 

Even so, gold’s uptrend and the spillover effect continues to hold silver price steady above a previously strong resistance zone of $35. The shift from the more expensive gold, especially for jewelry and investment has increased the demand for silver metal. This is in addition to its heightened industrial demand as the world strives to achieve net-zero emissions by 2050 and significant reductions by 2030. 

While silver is playing catch-up with its lustrous cousin -gold, the gold/silver ratio points to its potential for further price increase. The ratio, which measures the number of silver ounces needed to purchase one gold ounce, remains relatively high, holding steady above 90:1 for about three months now. 

Fed’s patience exerts pressure on precious metals

Financial markets have fully priced in two quarter-points rate cuts by the Federal Reserve by the end of the year. In addition to that, Fed officials’ dovish comments have yielded prospects of a rate cut by September even as the central bank maintains a wait-and-see approach. 

During his testimony at the House Financial Services Committee on Tuesday, Powell stated,”For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”

Ordinarily, lower interest rates boost precious metals by lowering the opportunity cost of holding non-yielding assets. However, the Fed’s patience has locked precious metals in a range while offering some support to the US dollar. On Wednesday, the dollar index held steady after extending losses to a one-week low in the previous session. Even so, the greenback remains under pressure; rendering silver less expensive for buyers holding foreign currencies. 

Silver price technical analysis

Silver price is down by about 4% since hitting a fresh 13-year high a week ago. Even so, it is still up by 23% since the start of the year. Even with the observed shift in sentiment, a weaker US dollar and bullish demand outlook have supported it above the crucial resistance-turned-support zone of $35. 

As seen on its daily price chart, the precious metal may remain range-bound in the near term. More specifically, the range between $35.50 and $36.55 will be worth watching in the ensuing sessions. A further pullback would likely place the support level along the 25-day EMA at $35.25 as the asset remains on an uptrend. 

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