- Silver price remains on backfoot even though the US PPI turned out softer-than-expected in July.
- Soft US producer inflation has increased investors’ confidence that price pressures remain on path that leads to banks’ target of 2%.
- Middle East conflicts limit Silver price’s downside.
Silver price (XAG/USD) faces pressure in Tuesday’s American session even though the United States (US) producer inflation remained soft in July. The US Bureau of Labor Statistics (BLS) showed that the core Producer Price Inflation (PPI), which strips off volatile food and energy prices, remains flat month-on-month. Annually, the underlying PPI decelerated at a faster-than-expected pace to 2.4% from expectations of 2.7% and the former release of 2.4%.
Soft US producer inflation has affirmed confidence among investors that price pressures continue to moderate. This has weighed on the US Dollar (USD) and bond yields by boosting expectations of a big interest-rate cut announcement by the Federal Reserve (Fed) in September.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, skids below the crucial support of 103.00. 10-year US Treasury Yields tumble to near 3.87%. Historically, lower yields on interest-bearing assets reduce the opportunity cost of holding investment in non-yielding assets, such as Silver. However, the Silver price declines too as investors await for more evidence to confirm that inflation is on track to return to the desired rate of 2%.
For more evidence, investors will focus on the US Consumer Price Index (CPI) data for July, which will be published on Wednesday. The CPI report is expected to show that monthly headline and core inflation rose by 0.2%. Annual headline and core CPI are estimated to have decelerated by one-tenth to 2.9% and 3.2%, respectively.
Meanwhile, geopolitical risks continue to limit the downside in the Silver price. Investors expect an all-out war in the Middle East between Iran and Israel after the killing of Hamas leader in Tehran.
Silver technical forecast
Silver price finds an interim support near the 200-day Exponential Moving Average (EMA) near $26.90, suggesting that the overall trend is uncertain. The major cushion for the Silver price will be the horizontal support plotted from May 5 high at $26.14.
The 14-day Relative Strength Index (RSI) hovers near 40.00. A decisive break below the same will trigger a bearish momentum.
Silver daily chart
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.
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
Editors’ Picks
EUR/USD stays below 1.1000 after EU data
EUR/USD fluctuates in a tight range below 1.1000 in the European session on Monday. The data from the Eurozone showed that Retail Sales rose by 0.2% on a monthly basis in August as forecast, failing to boost the Euro. Investors await comments from Fed officials.
GBP/USD struggles near 1.3100, Fedspeak awaited
GBP/USD is struggling near 1.3100 in European trading on Monday, erasing early gains. The pair is undermined by a negative shift in risk sentiment but the downside appears capped amid the US Dollar retreat ahead of speeches from several Fed policymakers.
Gold price keeps the red below $2,650, remains confined in a familiar trading range
Gold price remains on the defensive amid reduced bets for a 50 bps Fed rate cut in November. The USD consolidates last week’s strong gains and exerts some pressure on the XAU/USD. Geopolitical risks might continue to act as a tailwind and limit losses for the precious metal.
Is Dogecoin ready for a rally?
Dogecoin price extends gains on Monday after retesting its support level last week. This rise is supported by DOGE’s daily active addresses, an on-chain metric that has spiked to the highest level since early April.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.