Silver Price Forecast: XAG/USD pares US inflation-led gains at three-month top below $25.00

• Silver retreats from multi-month high, mildly offered of late.
• Reflation fears join Evergrande woes to weigh on sentiment.
• US bank holiday may keep the latest consolidation on the table.

Silver (XAG/USD) remains sidelined above $24.00, down 0.26% intraday following the jump to the highest levels last seen in August. In doing so, the bright metal buyers take a breather amid a quiet Asian session on Thursday after the US inflation figures fuelled market volatility the previous day.

While the market’s inactivity could be linked to the off-day in the US bond markets, fears emanating from Evergrande, as well as concerning US-China trade relations, could entertain momentum traders going forward.

That said, US President Biden showed readiness to battle the price pressure after the headline inflation figure, namely the Consumer Price Index (CPI) jumped to the 30-year high of 6.2% YoY. The nation's leader marks reversing the increase in inflation as the top priority, per Reuters.

Not only the US CPI but inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also rallied and refreshed the highest levels since May 2006 on Wednesday.

While the reflation fears underpin the Fed rate hike concerns and weigh on the sentiment, comments from Patrick Timothy Harker and Mary C Daly, respective Presidents of the Federal Reserve Bank of Philadelphia and San Fransisco, tried to defend the Fed doves. Mr. Harker highlighted the possibilities of a rate hike even while tapering is on whereas Fed’s Daly said, per Reuters, that it would be premature to change the calculation on raising rates.

Talking about the Sino-American trade deal, non-positive comments from US Trade Representative (USTR) Katherine Tai ahead of the next week’s virtual summit of US President Biden and his Chinese counterpart Xi Jinping added to the risk-off mood. Furthermore, talks that China’s struggling real-estate major Evergrande has officially defaulted as the DMSA - Deutsche Marktscreening Agentur (German Market Screening Agency), is up for preparing for the firm’s bankruptcy filing, per the Daily Express, weigh on the risk appetite.

Amid these plays, the US 10-year Treasury yields remain indecisive around 1.57%, after jumping the most in seven weeks, while the S&P 500 Futures print mild losses and the US Dollar Index (DXY) stays indecisive at the highest levels since July 2020.

Moving on, risk catalysts will be the key for near-term trade direction amid a light calendar and a bank holiday in the US.

Technical analysis

Failures to provide a daily closing beyond September 2021 peak near $24.85 can drag the quote to the 100-DMA retest, around $24.15 by press time. However, the silver bulls remain hopeful until witnessing a clear break of a six-week-old support line, around $23.35 at the latest. It’s worth noting that the 200-DMA level of $25.37 adds to the upside filters.