Silver Price Forecast: XAG/USD stays on sidelines around $28.60 ahead of US Inflation data

  • Silver price exhibits strength amid soft US Dollar ahead of US CPI data.
  • US consumer inflation remained stubbornly higher in the first three months of this year.
  • US bond yields drop amid firm speculation that the Fed will pivot to policy normalization from September.

Silver price (XAG/USD) trades in a confined range around $28.60 in Wednesday’s European session. The white metal clings to gains inspired by the soft US Dollar, which fell sharply despite the release of the hot United States Producer Price Index (PPI) inflation report for April.

Annual PPI figures grew expectedly while monthly figures beat expectations. The US Dollar Index (DXY) dips sightly below 105.00. The appeal for dollar-denominated Silver improves due to soft Greenback. After the release of the PPI report, Federal Reserve (Fed) Jerome Powell commented that the overall data was mixed.

When asked about the inflation outlook, Powell ruled out the likelihood of more rate hikes but emphasized keeping the monetary policy restrictive for a longer period to bring inflation down. 10-year US Treasury yields drop further to 4.43% as traders remain confident that the Fed will start lowering interest rates from the September meeting. Generally, falling yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver.

Meanwhile, investors await the US Consumer Price Index (CPI) and monthly Retail Sales data for April, which will be published at 12:30 GMT. The economic indicators will significantly influence speculation for Fed rate cuts.

US consumer inflation has remained stubbornly higher in the first quarter of the year. A higher-than-projected US inflation report will deepen fears that the last mile to the 2% inflation road is significantly more persistent than what was previously anticipated.

Silver technical analysis

Silver price recovers sharply after discovering buying interest near the horizontal support plotted from 14 April 2023 high around $26.09 on a daily timeframe. The above-mentioned support was earlier a major resistance for the Silver price bulls. The white metal is approaching the multi-year high at $29.80.

The near-term outlook of Silver has improved as it returns above the 20-period Exponential Moving Average (EMA), which trades around $27.30.

The 14-period Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, suggesting that a bullish momentum has been triggered.

Silver daily chart

Economic Indicator

Consumer Price Index ex Food & Energy (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is seen as bearish.

Read more.

Next release: Wed May 15, 2024 12:30

Frequency: Monthly

Consensus: 3.6%

Previous: 3.8%

Source: US Bureau of Labor Statistics

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.


Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content

Recommended content

Editors’ Picks

EUR/USD advances toward 1.0750 on renewed US Dollar selling

EUR/USD advances toward 1.0750 on renewed US Dollar selling

EUR/USD is extending its mild recovery toward 1.0750 early Europe on Tuesday. Risk flows remain and exert additional downside pressure on the US Dollar while Euro traders reposition ahead of Sunday's French election. Mid-tier US data and Fedspeak stay in focus.


GBP/USD recovers to 1.2700 as US Dollar weakness extends

GBP/USD recovers to 1.2700 as US Dollar weakness extends

GBP/USD is recovering to test 1.2700 in the European morning on Tuesday. Extended US Dollar weakness due to improved market mood, aids the pair's latest uptick. Traders look to the US sentiment data and Fed speeches for further impetus, as the UK calendar remains data-quiet. 


Gold struggle extends above $2,300, with Fedspeak on tap

Gold struggle extends above $2,300, with Fedspeak on tap

Gold price is reversing a part of Monday’s rebound, as sellers fight back early Tuesday amid a risk-on market profile. The US Dollar nurses losses alongside the US Treasury bond yields, undermined by the dovish commentaries from Federal Reserve policymakers.

Gold News

Tron price primed for a surge after breaking descending trendline barrier

Tron price primed for a surge after breaking descending trendline barrier

Tron price has surged above and retested the descending trendline, indicating a bullish market structure. On-chain data reveals increasing activity among TRX active accounts, suggesting heightened blockchain usage that may fuel an impending rally in Tron’s price.

Read more

US Dollar offered, but intra-day momentum indicators are stretched

US Dollar offered, but intra-day momentum indicators are stretched

The Dollar Index reached its best level since May 1 before the weekend but has come back softer against all the G10 currencies and most emerging market currencies.

Read more