Silver Price Prediction – Prices Rebound Slightly on Dollar Weakness

Silver prices rebounded on Wednesday, but it appears to be a dead cat bounce. The deceleration in CPI  was a welcome sign for the precious metal complex as gold prices gained and the dollar eased as Treasury yields declined. Wednesday CPI data showed that consumer prices might be peaking, and inflation might be transitory as the Fed has been claiming. On Thursday, the Labor Department will report PPI, which will provide traders with some insight into wholesale prices.

Technical analysis

Silver prices rebounded on Wednesday but are still lower on the week. Target support is seen near the August lows at 22.10. Resistance is seen near former support near the breakdown level of 24.40. Short-term momentum has turned positive as the fast stochastic generated crossover buy signal.  Medium-term momentum has turned negative as the MACD (moving average convergence divergence) generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in negative territory with a downward sloping trajectory which points to lower prices.

CPI Rises in Line with Expectations

On Wednesday, the BLS reported that its consumer price index rose 5.4% in July year over year, in line with June’s figure and matching expectations. The Labor Department said CPI increased 0.5% on a month-over-month basis, matching a consensus forecast. Core CPI only rose by 0.3% which was lower than forecast and below the June increase of 0.9%. The core figure is up 4.3% over the last year, a slight deceleration from June’s 4.5%.