Silver Price Forecast: XAG/USD advances to near $42.40 on Fed’s dovish policy outlook

• Silver price gains further to near $42.40 as the Fed has signaled two more interest rate cuts this year.

• On Wednesday, the Fed reduced interest rates by 25 bps to 4.00%-4.25%.

• Investors await Fed’s Daly speech scheduled at 18:30 GMT.

Silver price (XAG/USD) extends its Thursday’s upside move to near $42.40 during the European trading session on Friday. The white metal strengthens as the Federal Reserve (Fed) has started the monetary-easing campaign amid growing United States (US) labor market concerns.

On Wednesday, the Fed reduced interest rates by 25 basis points (bps) to 4.00%-4.25% and signaled through its dot plot that there would be two more in the remainder of the year.

Lower interest rates by the Fed bode well for non-yielding assets, such as Silver.

Fed Chair Jerome Powell warned of slowing US labor demand, which forced officials to support an adjustment in policy rates. Balance of risks has shifted, and I can no longer say that the labor market is solid,” Chair Jerome Powell said.

For more guidance on the US monetary policy outlook, investors await the speech from San Francisco Fed President Mary Daly, which is scheduled at 18:30 GMT. Investors would look for cues regarding the pace of interest rate cuts by the Fed in the monetary policy meeting ahead.

Silver technical analysis

Silver price faces selling pressure near the upper end of the Rising Channel formation. However, the near-term trend of the white metal remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around $40.75.

The 14-day Relative Strength Index (RSI) cools down to near 63.00, and is likely to find cushion near 60.00. A fresh bullish momentum would emerge if the RSI holds above 60.00.

Looking down, the psychological figure of $40.00 will be a key support for the Silver price. On the upside, the September 16 high of $43.00 will be a major barrier.

Silver daily chart