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Silver Prices Forecast: Volatility Expected Following Thursday’s CPI Report

By:
James Hyerczyk
Published: Jul 10, 2024, 12:06 GMT+00:00

Key Points:

  • Silver climbs above 50-day moving average at $29.76, indicating increased buying pressure. Market eyes last week's high of $31.49 for upside breakout confirmation.
  • Powell's cautious stance and improved inflation data strengthen case for rate cuts. StoneX analyst suggests Powell's remarks signal potential loosening of monetary policy.
  • World Gold Council reports positive inflows to gold ETFs in June. This trend is considered bullish for silver due to correlation between precious metals.
Silver Prices Forecast:

In this article:

Silver Gains as Powell Hints at Potential Rate Cuts

Silver prices are climbing on Wednesday, buoyed by Federal Reserve Chair Jerome Powell’s recent comments and anticipation of a crucial U.S. inflation report. The market is showing strong respect for key technical levels, suggesting a bullish short-term outlook.

At 11:45 GMT, XAG/USD is trading at $31.06, up $0.26 or +0.84%.

Technical Analysis Points to Buyer Presence

Silver is currently testing the 50% retracement level at $31.02, with buyers showing strong interest. The move above the 50-day moving average at $29.76 further indicates buying pressure. However, the market still needs to surpass last week’s high of $31.49 to confirm an upside breakout, potentially putting the 11-year high of $32.52 in focus.

Powell’s Testimony Supports Precious Metals

In his testimony to Congress, Powell maintained a cautious stance while acknowledging improved inflation data. His comments suggest that the case for interest rate cuts is strengthening, which typically supports non-yielding assets like silver. StoneX analyst Rhona O’Connell noted that Powell’s remarks were “giving at least an amber light towards rate cuts sooner than later.”

Market Eyes Critical CPI Data

Traders are now focused on the upcoming U.S. Consumer Price Index (CPI) data, due Thursday. The report is expected to show headline prices rose 0.1% month-on-month, with core prices gaining 0.2%. Annual gains are projected at 3.1% and 3.4%, respectively. This data will be crucial in shaping expectations for future Fed policy decisions.

ETF Inflows Signal Bullish Sentiment

The World Gold Council reported that global physically backed gold exchange-traded funds saw inflows for the second consecutive month in June. This development is perceived as bullish for silver, given the correlation between the two precious metals.

Market Forecast

The combination of Powell’s dovish hints, technical buying pressure, and positive ETF flows paints a bullish short-term outlook for silver. However, traders should remain cautious ahead of the CPI release, as it could significantly impact market direction. A lower-than-expected inflation print could further boost silver prices, potentially pushing the metal towards its recent highs.

Technical Analysis

Daily Silver (XAG/USD)

Silver’s price action on Wednesday reveals a market in consolidation. While major trends point higher, the rally has stalled between support at $30.59 and last week’s high at $31.49, indicating investor caution before key economic data.

Thursday’s CPI release could be the catalyst for a significant price swing. Bullish CPI results may propel silver through $31.49, with potential for a run to $32.52. Conversely, bearish CPI data could trigger a break below $30.59, possibly pushing prices towards the 50-day moving average at $29.76. Traders should monitor these key levels closely as the market reacts to the inflation report.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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