Silver Price Forecast: XAG/USD surges to near $32.60 as US Dollar weakens, Fed policy in focus

• Silver price soars to near $32.60 amid weakness in the US Dollar.
• The Fed is almost certain to keep interest rates steady on Wednesday.
• US-China trade uncertainty keeps limiting the downside in the Silver price.

Silver price (XAG/USD) rallies to near $32.60 during North American trading hours on Monday. The white metal strengthens as the US Dollar (USD) slumps at the start of the week, with the Federal Reserve's (Fed) monetary policy meeting in focus. Technically, a decline in the US Dollar makes investment in the Silver price an attractive bet for investors.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, is down almost 0.5% around 99.50.

According to the CME Fedwatch tool, traders are almost certain that the central bank will leave interest rates steady on Wednesday. The tool also shows that the probability for the Fed to lower borrowing rates in June has dropped to 32% from 66% seen a week ago. Traders have pared Fed dovish bets for the June meeting after the release of the better-than-projected United States (US) Nonfarm Payrolls (NFP) data for April.

Theoretically, a high-interest-rate environment bodes poorly for non-yielding assets, such as Silver.

Meanwhile, diminishing hopes of a US-China trade war resolution in the near term have also supported the Silver price. The demand of safe-haven assets, such as Silver, increases amid heightening geopolitical tensions.

Trump said on Sunday that he is not going to speak with Chinese President Xi Jinping this week but expressed willingness to lower tariffs on China. At some point, I'm going to lower them, because otherwise, you could never do business with them, and they want to do business very much."

On the economic front, US ISM Services PMI data for April has come in better than expected. The Services PMI expanded at a faster pace to 51.6 from 50.8 in March and estimates of 50.6.

Silver technical analysis

Silver price struggles to revisit an over three-week high around $33.70. The near-term outlook of the white metal has become uncertain as it falls below the 20-day Exponential Moving Average (EMA), which trades around $32.65.

The 14-day Relative Strength Index (RSI) falls below 50.00 after failing to break above 60.00, indicating that investors are not bullish anymore.

Looking up, the March 28 high of $34.60 will act as key resistance for the metal. On the downside, the April 11 low of $30.90 will be the key support zone.

Silver daily chart