Silver Prices Rise Amid U.S. Debt Default Risk and Fed Rate Cut Speculations.

Silver Settles Higher as U.S. Debt Default Looms and Fed Rate Cut Speculations Subside

Silver prices experienced a modest increase of 0.1% on the previous day, closing at 72,658 amid concerns over the risk of a U.S. debt default. Additionally, traders adjusted their positions on the Federal Reserve’s potential interest rate cuts following encouraging data on U.S. consumer spending. The ongoing negotiations between U.S. President Joe Biden and Republican Congressman Kevin McCarthy regarding the U.S. debt ceiling raised hopes for a resolution, but uncertainty persisted. Biden warned that a default would plunge the economy into a recession, a scenario that investors fear would have negative global repercussions.

Solid Increase in April Consumer Spending Dampens Expectations for Near-Term Rate Cuts

The solid growth in consumer spending during April, along with statements from Federal Reserve officials, tempered expectations for near-term interest rate cuts. Austan Goolsbee, President of the Chicago Fed, emphasized that it was premature to discuss rate cuts, while Loretta Mester, President of the Cleveland Fed, indicated that rates had not reached a level where the central bank could maintain stability in the face of persistent inflation. As a result, interest rate futures pricing indicated a diminishing probability of a rate cut in June, dropping from approximately 17% a month ago to zero.

 Eurozone Inflation Accelerates, Confirming Stubborn Price Growth

Eurostat, the statistical office of the European Union, reported an acceleration in inflation last month within the Eurozone. This announcement confirmed preliminary data that pointed to persistent price growth across the 20 nations sharing the euro currency. The increased inflationary pressure adds another layer of complexity to the global economic landscape and further influences market sentiment and investment decisions.

 Technical Analysis Indicates Short Covering as Silver Market Reacts

From a technical standpoint, the silver market witnessed short covering as open interest dropped by 1.13% to reach 15,053. Simultaneously, prices rose by 73 rupees. Currently, silver finds support at 72,232, and a potential breach of this level may lead to a test of 71,807. On the other hand, resistance is expected to emerge at 72,998, and a break above this level could result in silver prices testing 73,339.

Conclusion:

Silver prices experienced a modest increase amid the risk of a U.S. debt default and reduced expectations for a Federal Reserve rate cut. Positive U.S. consumer spending data and comments from Fed officials dampened the possibility of near-term rate cuts. Meanwhile, Eurozone inflation accelerated, indicating persistent price growth. Technically, the silver market saw short covering, prompting adjustments in open interest and price movements. The outcome of the ongoing U.S. debt ceiling negotiations and global economic factors will continue to shape the trajectory of silver prices in the coming days.