Silver Price Forecast: XAG/USD holds recovery near $57.60 amid weakness in US Dollar

Silver price (XAG/USD) managed to stay near the $57.60 level during the European trading session on Friday, showing a recovery from the previous day's decline. The white metal gained traction as the US Dollar (USD) faced pressure due to risk-off sentiments driven by Artificial Intelligence (AI) influences. The US Dollar Index (DXY) slipped by 0.1% to approximately 101.90, marking a sharp correction from its one-year high of 102.95, which was observed after the release of US Consumer Price Index (CPI) data.

Economists at DBS Group Research believe that the market's reaction to the latest upward surprise in US CPI has exposed weaknesses in the Dollar's recent advancement. They note that the "USD's inability to maintain gains after the upside CPI surprise raises doubts about the sustainability of its rally," as the initial surge and subsequent rise in US Treasury yields have slowed as investors reconsider the monetary policy outlook.

Moreover, the reversal in Treasury yields and Fed hike expectations signal that investors are wary of the growth and earnings repercussions stemming from further rate hikes, hinting at a more cautious approach to potential additional rate increases. Additionally, political uncertainty, particularly with the upcoming US midterms, adds to the challenges facing a clear, durable Dollar rally, as the political landscape appears less predictable.

As a result, investors are questioning whether the prevailing assumption that Republicans would lose the House but retain the Senate is accurate, given the rising risk of a Democratic sweep of Congress, which could lead to stricter regulatory scrutiny, policy gridlock, and the sustainability of high equity valuations. In the technical analysis, XAG/USD is trading at $57.53, with a bearish near-term bias as the price remains below the 20-day exponential moving average (EMA) of $60.49.

The downward break beneath this crucial trend indicator suggests that the recent decline may turn into a more significant correction. Furthermore, the Relative Strength Index (14) at around 38 indicates persistent but not yet extreme selling pressure. Should the price drop beneath the 20-day EMA at $60.49, momentum readings near oversold territory could imply the possibility of continued consolidation or additional weakness, rather than a significant bounce back.