Silver Prices Forecast: Rebounding with Modest Gain After Tuesday’s Slide

Silver Price Analysis Amid Inflation Concerns

Silver prices are higher on Wednesday after rebounding from yesterday’s steep loss, fueled by U.S. inflation data and Federal Reserve rate cut expectations. Despite a recent downturn, silver’s outlook appears cautiously optimistic, with its downside potential seemingly limited compared to gold.

At 11:49 GMT, Silver XAG/USD is trading $24.30, up $0.16 or +0.65%.

Inflation and Federal Reserve Decisions

The latest U.S. inflation figures exceeded forecasts, showing inflation’s persistence. This development has directly impacted silver prices, contributing to their recent decline. The persistent inflation influences the Federal Reserve’s monetary policy decisions, particularly regarding interest rate cuts. Investors initially expected a rate cut in June, but the recent data has led to a reassessment, slightly diminishing this expectation, and adding pressure to silver’s valuation.

Market Reactions and Treasury Yields

Following the release of the inflation report, silver prices saw a decline, reflecting immediate market responses. However, the broader market reaction remained contained. The U.S. Treasury yields and the dollar index showed mixed responses, with the former climbing and affecting the attractiveness of non-yielding assets like silver.

Fed’s Stance on Inflation

The Federal Reserve is closely watching inflation trends against its 2% target, with this stance directly affecting silver markets. The recent comments by Federal Reserve Chair Jerome Powell about a potential near-future rate cut, while contributing to market stability, have also led to cautious trading in silver, as investors weigh the implications for precious metals.

Short-Term Forecast

Given the recent data and market reactions, a moderate correction in silver prices could be on the horizon. The downside target zone is pegged between $23.48 and $23.19. The market’s limited reaction to inflation data and Powell’s comments on disinflation suggest a potential support level for silver, thereby limiting its downside risk in the short term. This scenario offers a relatively stable outlook for silver investors, albeit with a cautious eye on upcoming economic indicators.

In summary, while silver may face some correction due to inflation data and Federal Reserve policy expectations, its downside seems limited, indicating a stable yet cautious short-term market perspective.

Technical Analysis

Silver (XAG/USD) is trading higher on Wednesday, but the inside move it’s producing suggests investor indecision and impending volatility.

Our work indicates a short-term top may be forming, however, we do not see a change in trend. The chart pattern suggests that traders think the market is overpriced and may be due for a pullback into a short-term retracement zone at $23.48 to $23.19. Since this area represents value, we expect new money to come in at this point and re-enter on the long side. Additional support is the 200-day moving average at $23.30 and the 50-day moving average at $23.00.