Silver Price Forecast: XAG/USD consolidates near $41.00 ahead of US CPI
- Silver consolidates near $41.00 as traders await the key US CPI report.
- A stronger CPI print may fuel Dollar strength and weigh on precious metals, while softer data would reinforce Fed rate cut bets.
- Technical signals show bearish RSI divergence, with $40.50 as key support and $41.50 as immediate resistance.
Silver (XAG/USD) trades under mild pressure on Thursday as a firm US Dollar (USD) keeps the white metal subdued ahead of the highly anticipated US Consumer Price Index (CPI) release. At the time of writing, XAG/USD is consolidating around $41.00, pausing after marking a fresh 14-year peak around $41.67 earlier this week.
All eyes are on the August US CPI report due at 12:30 GMT, which is expected to provide the final policy cue before next week’s Federal Reserve (Fed) meeting.
Headline inflation is expected to pick up modestly, rising 0.3% on the month and pushing the annual rate to 2.9%, while core CPI is seen steady at 0.3% MoM and 3.1% YoY.
A stronger-than-expected print could fuel the US Dollar's rebound and lift Treasury yields, pressuring precious metals in the short term. Conversely, a softer reading would bolster expectations for a Fed interest rate cut at next week’s meeting, offering renewed support to Silver. Lower borrowing costs reduce the opportunity cost of holding non-yielding assets such as Silver, keeping the broader bullish tone intact.
From a technical perspective, Silver has been consolidating within a tight $41.50–$40.50 range since early September. On the daily chart, a bearish divergence on the Relative Strength Index (RSI) points to fading upside momentum, while the flattening Moving Average Convergence Divergence (MACD) histogram signals weakening bullish pressure.
Immediate support lies at $40.50, with a break below exposing the 21-day Simple Moving Average (SMA) near $39.52. On the upside, a sustained move above $41.50 would reduce the significance of the divergence and open the door toward the $42.00 psychological barrier and beyond.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Author
Vishal Chaturvedi
FXStreet
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.
