Silver Prices Forecast: Market Awaits CPI Data, Rate Cut Clues

Silver Trading Update

Silver (XAG/USD) is currently exhibiting minimal movement, trading at $24.32, a slight increase of $0.01 or +0.04% as of 10:47 GMT. This stability comes in the wake of a vigorous rally last week, sparked by a less aggressive Federal Reserve and cooling signs in the U.S. labor market. Traders are now closely monitoring the upcoming consumer price inflation (CPI) data for further cues.

U.S. Labor Market and Fed’s Influence

The recent peak in silver prices, the highest since December 5, correlates strongly with the U.S. labor market showing signs of slowing. This situation is directly linked to the Federal Reserve’s policy direction. Post Chair Powell’s congressional testimony, the market is anticipating imminent rate cuts. Presently, traders are pricing in 3-4 cuts of 25 basis points each, with high expectations for the first cut in June.

CPI Data and Interest Rate Cut Projections

Attention is now centered on the February CPI data, due on Tuesday. A CPI figure lower than forecast could bolster the argument for an early rate cut, thereby supporting silver prices. According to the FedWatch Tool, there’s a 73% probability of a rate reduction at the Fed’s June meeting, reinforcing the bullish sentiment in the silver market.

Gold Versus Silver

Silver’s recent performance is often compared to gold’s rally. However, silver’s dual role as a precious and industrial metal positions it for a potentially more dynamic performance. If global growth accelerates, silver is expected to shift from lagging behind gold to outperforming it, particularly in the second half of the year.

Silver Market Outlook

Given the current environment, the forecast for silver remains optimistic. The anticipated shift to a more dovish Federal Reserve policy, combined with projected global economic growth, suggests a robust performance for silver. Although short-term variations are likely, the general trend points towards a continued rise in silver prices, underpinned by its dual appeal as both an investment and industrial asset.

Technical Analysis

Silver (XAG/USD) is putting in a flat performance on Monday, slightly below key resistance at $24.50 to $24.64. The latter is a potential trigger point for an acceleration to the upside with the next major target December 4 main top at $25.91.

While hovering just under resistance, the market remains vulnerable to a near-term correction with the target a static support level at $23.55. This is followed by the 50-day moving average at $22.96 and the 200-day moving average at $23.29.