Silver Market Outlook: Traders Await PCE Data for Direction

Silver Market Update

Silver prices surged on Friday in anticipation of a crucial U.S. inflation report, though the metal is on track for its first weekly decline in two weeks. The easing of geopolitical tensions in the Middle East has lessened the immediate threat of market disruption.

At 10:44 GMT, XAG/USD is trading $27.62, up $0.175 or +0.64%.

Weekly Overview

Despite today’s gains, silver faces its most significant weekly loss in recent times, attributed to the subsiding Middle Eastern crisis. Market volatility remains, influenced by expectations around the Federal Reserve’s interest rate decisions and the mixed signals from recent U.S. economic data, which revealed both a significant slowdown in growth and persistent inflationary pressures.

Economic Influences and Silver Pricing

The latest U.S. economic reports indicate a troubling deceleration in GDP growth for the first quarter, registering at 1.6% versus the anticipated 2.4%, alongside an uptick in consumer prices that exacerbates concerns over enduring inflation. These developments have cooled expectations for early rate cuts by the Fed, impacting silver’s appeal as a non-yielding investment. U.S. Treasury yields, which inversely affect silver prices, have seen fluctuations, dropping after the GDP report but previously reaching highs not seen since November.

Market Forecast

Attention is now focused on the upcoming core Personal Consumption Expenditures (PCE) index data, the Fed’s preferred inflation metric. Market projections are set for a 0.3% monthly increase and a 2.7% annual gain in the core PCE. The data will be instrumental ahead of next week’s Fed policy meeting, where interest rates are expected to remain unchanged. The strength of the inflation figures will critically shape silver’s short-term price movements, potentially moderating expectations for Fed rate cuts and influencing the metal’s attractiveness to investors.

Technical Analysis

The short-term trend is down, but the intermediate and long-term trends are up.

The short-term range is $24.33 to $29.80. Its 50% level at $27.06 is potential support. It survived a test earlier in the week.

The minor range is $29.80 to $26.67. Its 50% level at $28.24 is potential resistance

Look for volatility following the release of the PCE report at 12:30 GMT. A strong upside bias could develop on a sustained move over $28.24, while a break through $27.06 could trigger an acceleration into the 50-day moving average at $25.42.