Silver Price Forecast: XAG’s Shine in the Balance Ahead of CPI Data

Highlights

• Silver trades near one-month lows.
• U.S. CPI release could influence Fed’s interest rate decisions.
• Geo-political events could fortify silver’s market position.

Overview

In the world of precious metals, Silver (XAG) is drawing investor attention as the forthcoming U.S. inflation data release nears. Currently trading at $22.70 (as of 05:36 GMT), the metal has seen fluctuations recently, with an earlier session dipping to near one-month lows. This upcoming data has the potential to significantly sway the Federal Reserve’s perspective on interest rates.

Potential Rate Hikes Concern Silver Enthusiasts

The crux of the anticipation is centered around the U.S. consumer price index (CPI). With the Dow Jones projecting a subtle 0.2% increase, contrasting with the Cleveland Federal Reserve’s more aggressive 0.4% prediction, investors are on the edge. The central concern revolves around U.S. headline core, where a pronounced downtrend could spur the disinflation trend. This could spell good news for silver, traditionally seen as a defense against inflation. But a looming cloud of potential rate hikes might offset its attraction.

September’s Rate Decision: Fed’s Next Move

Broadening the lens to the market sentiment, there’s a prevailing belief that the Fed might abstain from rate hikes this September. Talk in financial circles suggests the next big move might be a rate cut, eyed for spring 2024. Should this occur, combined with an expected dip in the U.S. dollar, silver’s shine might very well return for investors.

Geopolitical Shifts Strengthen Silver’s Position

But silver’s journey isn’t isolated. Noteworthy is the dip in the SPDR Gold Trust, which recently hit a March low. However, a silver lining remains. Recent geopolitical events, underscored by President Biden’s order curbing U.S. investments in China, could cement silver’s pivotal position in the ever-evolving global economic tapestry.

Technical Analysis

Silver’s current 4-hour price of $22.68 exhibits a marginal rise from the prior 4-hour close at $22.66. While the price hovers just below the 50-4H moving average of $23.59, it’s further distanced from the 200-4H moving average set at $23.75, suggesting a bearish momentum. This sentiment is further validated by the 14-4H RSI standing at 30.99, indicating the metal is nearly in the oversold territory.

The current price lies precariously close to the main support zone, ranging from $22.70 to $22.28, reinforcing potential downside risks. However, the considerable gap between the current price and the primary resistance area (spanning $25.00 to $25.27) underscores a strong resistance level ahead. Given the proximity to the support area, combined with the RSI and moving average data, the short-term market sentiment leans bearish for Silver.