|

Silver Price Forecast: XAG/USD gains ground following soft PCE data

  • The XAG/USD jumped above $22.70, seeing more than 0.80% gains and is set to close a winning week.
  • Core PCE declined to 4.6% YoY in May, lower than expectations.
  • Following the data the USD and US bond yields retreated.

The XAG/USD surpassed the $22.70 mark on Friday and registered an increase of over 0.80%. This positive momentum positions it for a week of gains after two weeks of losses. The boost in Silver prices can be explained by the release of soft Core Personal Consumption Expenditures (PCE) data from the US from May, which revealed a decline to 4.6% year-on-year in May, falling short of expectations. As a result, the US dollar and US bond yields retreated in response to the data favoring the precious metal.

USD weakened after soft Core PCE figures

The US's Core Personal Consumption Expenditures (PCE), which measures the amount of money consumers spend in a month excluding seasonally volatile products such as food and energy, witnessed a decline in May. The figure decelerated from 4.7% to 4.6% YoY in May, while the headline dropped from 4.6% to 3.8%. 

As a reaction, the DXY Index dropped from 103.55 to 102.90 while US bond yields which could be considered the opportunity cost of holding non-yielding precious metals retreated from daily highs. In that sense, the yield on the 2-year Treasury Bond reached a peak of 4.93%, marking its highest level since March 9 and subsequently pulled back to 4.85%. In addition, the 5-year and 10-year rates experienced declines, with the former falling to 4.13% and the latter dropping to 3.83%.

Focus now shifts to next week’s labor market data from the US, including ADP, Jobless Claims on Thursday, and the Nonfarm Payrolls report on Friday.

XAG/USD Levels to watch

According to the daily chart, the XAG/USD appears bearish in the short term. The Relative Strength (RSI) and Moving Average Convergence Divergence (MACD) both remain in negative territory, suggesting that the sellers have the upperhand. In addition, traders should eye a bearish cross performed by the 20 and 100-day Simple Moving Average (SMA) of $23.35, which could fuel further downside.

On the downside, support levels to watch stand up at the 200-day SMA at $22.53, followed by  $22.30 and June lows at $22.15. On the flipside, resistances are seen at $23.00 followed by $23.10 and the mentioned convergence of SMA’s at $23.35.

XAG/USD Daily chart

XAG/USD

Overview
Today last price22.78
Today Daily Change0.20
Today Daily Change %0.89
Today daily open22.58
 
Trends
Daily SMA2023.4
Daily SMA5023.99
Daily SMA10023.34
Daily SMA20022.56
 
Levels
Previous Daily High22.88
Previous Daily Low22.28
Previous Weekly High24.2
Previous Weekly Low22.11
Previous Monthly High26.14
Previous Monthly Low22.68
Daily Fibonacci 38.2%22.51
Daily Fibonacci 61.8%22.65
Daily Pivot Point S122.28
Daily Pivot Point S221.98
Daily Pivot Point S321.68
Daily Pivot Point R122.88
Daily Pivot Point R223.18
Daily Pivot Point R323.47

Author

Patricio Martín

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

More from Patricio Martín
Share:

Editor's Picks

GBP/USD revisits 1.3530; Dollar pushes harder

GBP/USD adds to the weekly correction and recedes toward the 1.3530 zone on Friday. Indeed, Cable faces increasing selling pressure on the back of extra gains in the Greenback, particularly fuelled by Chair Warsh’s speech at the Jackson Hole Symposium and the US NFP Annual Revision (-79K).

EUR/USD breaches below 1.1600, multi-day lows

EUR/USD now accelerates its decline and retreats to seven-day troughs in the sub-1.1600 region at the end of the week. The pair’s pullback comes on the back of the strong rebound in the US Dollar after Chair Warsh delivered a hawkish message in Jackson Hole, while the US NFP Annual Revision came in at -79K.

Gold bounces off $4,425 on US Dollar pullback

Gold recovers slightly from a one-and-a-half-week low near $4,425 in the Asian session on Monday, though any meaningful recovery seems elusive. Fed Chair Kevin Warsh’s Jackson Hole speech was perceived as hawkish, raising expectations for a September rate hike. Adding to this, fresh US strikes on Iran act as a tailwind for the safe-haven US Dollar and should cap the bullion.

Week ahead: RBNZ and BoC decide on rates ahead of all-important US NFP
The US dollar staged a modest recovery this week, perhaps as traders decided to cover some of their short positions amid slightly stickier or in-line US PCE inflation numbers for July, confounding expectations of softer prints amid the softness revealed in the CPI data for the month.
US Dollar Weekly Forecast: Focus is back on 100.00 as Fed hawks take centre stage

It has already been a positive week for the US Dollar, but a hawkish speech from Chair Kevin Warsh at the Jackson Hole Symposium may have laid the groundwork for a more sustained rebound in the Buck.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.