In a speech at the annual meeting of the central bank in Jackson Hole, Federal Reserve Chairman Colin Powell maintained a dovish tone to put pressure on the dollar to boost precious metals. Silver has followed gold and has hovered at a high level in three weeks, with silver prices remaining above $25.06 near the 20-day moving average. Given the gradual consolidation of the momentum line and the cushioning effect of a weak dollar, silver prices are continuing to gently challenge the key moving average, and optimistic fundamentals make buyers hopeful. In particular, the US core PCE index grew at an annual rate of 3.6% in July, in line with market expectations.
Global markets are focused on the annual meeting of central banks, and the Federal Reserve is convinced that inflation is a temporary motto. Powell admitted for the first time that he may start to scale back bond-buying (Taper), this year, but stressed that it is not imminent for the Fed to raise interest rates. At the same time, he also reiterated that the recent high inflation should be temporary and will continue to pay attention to future economic data. The dollar fell as Treasury yields fell, consumer confidence weakened and inflation expectations fell. Powell hinted to the market that the Fed may start scaling back its bond-buying program sometime in 2021.
Peter Spina, president and CEO of GoldSeek.com, said that Powell's speech was highly anticipated by the market, but there was no really big news. "such remarks are measured, not too hawkish or even dovish," he said. Powell did not provide any details about the timing of the contraction, which helped push gold above $1800 as the dollar remained weak. "
"at the most recent July meeting of the FOMC, I agreed with most participants that it might be appropriate to start slowing the pace of asset purchases this year if the economy develops as widely as expected," Powell said.
Currently, the Fed buys $80 billion of Treasuries and $40 billion of mortgage-backed securities every month in an effort to put downward pressure on long-term interest rates and boost economic demand.
Jeff Klearman, a portfolio manager at Granite Shares, said that although Powell said the Fed planned to adjust its loose monetary policy moderately later this year, he still believed that the recent high inflation was only a temporary phenomenon and seemed to predict that all adjustments would be quite moderate.
"moderate changes in Fed monetary policy could keep real and nominal interest rates at or near historic lows, supporting all asset prices, including gold," he continued. "
Us consumer income rose 1.1 per cent in July, the biggest increase since March, according to the Commerce Department. This spring was mainly due to the inclusion of an expanded child tax credit in Congress's $1.9 trillion pandemic relief plan. Consumer spending growth slowed to 0.3 per cent last month, down from 1.1 per cent in June.
Referring to silver price analysis, FXStreet pointed out that silver hovered near its highest level in three weeks, keeping it above its 20-day moving average on Friday. Gradually consolidate the momentum line, optimistic fundamentals let buyers full of hope. The July low increased the upstream filter, and the immediate upward trend line challenged the pullback trend. In the Asian session earlier this week, silver still offered modestly around $24.
Given the weak dollar and the slowly rising momentum line, silver prices are likely to break through the direct barrier around $24.10. However, a low close to $24.50 last month will challenge the commodity's short-term upside. It should be noted that a bid above $24.50 would target a 200-day moving average of $25.86, while a round number of $25 and a June low close to $25.50 could cushion the rally.
Or, if it closes below the 20-day moving average of $23.82 a day, the extreme airship should be pulled back to the three-week rising support line around $23.50. With silver sellers keeping control below $23.50, the annual low of nearly $22.15 should return to the chart. In the fall, the Aug. 20 wobble low of $22.90 may be suspended.
