Silver Price Forecast: XAG Slides Amidst Dollar’s Rise, CPI Surprises

Highlights

• Silver faces down week amidst strong USD.
• U.S. CPI at 3.2%, below the anticipated 3.3%, Core still high. 
• Market divided on Federal Reserve’s potential 2023 decisions.

Overview

Silver (XAG) prices, much like their golden counterparts, are struggling despite U.S. inflation figures that failed to meet expectations. As Friday rolls in, silver is poised to conclude one of its weakest seven-week periods, largely due to the formidable performance of the U.S. dollar and resilient bond yields.

CPI Misses Mark; Fed’s Response?

Delving into specifics, the U.S. Consumer Price Index (CPI) – a critical gauge of inflation – recorded a 3.2% annual increase. This fell short of Reuters’ anticipated 3.3%, fueling the speculation that the Federal Reserve might abstain from rate hikes in 2023. Dissecting the CPI further, core readings, which exclude volatile components like food and energy, have surged by 4.7% over the last year. Despite these nuances, the primary take-away is the overarching consensus that the Federal Reserve may maintain the status quo on policy rates come September. This decision will likely be influenced by the potential for slowing inflation, especially with the expected decline in robust shelter inflation.

Mixed Sentiments Surround Rate Hikes

However, the market’s sentiment is far from unanimous. While many anticipate a steady stance from the Federal Reserve in its next assembly on September 20th, certain figures like Federal Reserve Bank Governor Michelle Bowman suggest that interest rate hikes might still be on the table. This dichotomy in perspectives is crucial for silver investors since rate hikes typically bolster bond yields, making non-yielding assets like silver less attractive.

Silver’s Rally Falters; Dollar Rises

Summing up the week’s trends, silver’s short-lived rally post the CPI revelation seemed to fizzle out. This wane in enthusiasm can be attributed to the broader market realization that a 4.7% core CPI isn’t particularly impressive. The U.S. dollar’s resurgence, propelled by comments from Fed member Mary Daly, further dented silver’s appeal. As we approach week’s end, silver remains under duress, echoing the patterns of the U.S. dollar index and 10-year Treasury bond yields – both aiming for their fourth straight week of gains. For traders, the immediate horizon for silver appears bearish, influenced heavily by macroeconomic cues and the Federal Reserve’s impending decisions.

Technical Analysis

Based on the 4-hour chart data provided for Silver (XAG), the current price of 22.75 is slightly above the previous 4-hour price of 22.68, suggesting a minimal uptick.

However, the current price resides below both the 200-4H moving average of 23.72 and the 50-4H moving average of 23.38, indicating a bearish sentiment in the short-term. The 14-4H RSI stands at 40.13, slightly below the neutral 50 mark, suggesting weaker momentum.

Price-wise, Silver is hovering just above the main support area (22.70 to 22.28) and is considerably below the main resistance area (25.00 to 25.27). In conclusion, the current market sentiment for Silver on the 4-hour chart is bearish.