Silver Prices Forecast: Weak PPI Data Needed to Sustain Upside Momentum

Silver Edges Up Ahead of Key U.S. Inflation Reports

Silver prices are edging up on Tuesday, with investors closely monitoring upcoming U.S. economic reports that could significantly impact interest rate forecasts. With the U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) slated for release, the market is poised for potential shifts depending on these key inflation indicators.

At 10:48 GMT, Silver (XAG/USD) is trading $28.41, up $0.21 or +0.74%.

PPI and CPI: Forecast and Implications

The PPI is anticipated to show a modest increase of 0.3% month-over-month, signaling a gradual uptick in wholesale prices that might predict a corresponding rise in consumer prices. Annually, the PPI is expected to reach a 2.2% increase. Following this, the CPI report is predicted to maintain a steady rise of 0.4% month-over-month, with a slight decrease in the annual rate to 3.4% from the previous 3.5%. Notably, the core CPI (excluding food and energy) is projected to rise by 0.3%.

These metrics underscore a persistently elevated inflation environment, slightly above the Federal Reserve’s target of 2%. This persistence suggests the Federal Reserve may maintain current interest rates to manage inflation, possibly delaying any rate cuts until more definitive signs of sustained disinflation emerge.

Short-Term Forecast

Given these inflation trends and the Federal Reserve’s cautious stance, significant changes in monetary policy seem unlikely in the near term. The U.S. dollar may strengthen as higher interest rates continue to attract investment in dollar-denominated assets, potentially tempering significant rallies in silver prices despite its status as a safe haven during periods of high inflation. On the other hand, lower interest rates and a weaker dollar will set a bullish tone.

Geopolitical tensions, such as the recent military activities in Gaza, could further drive demand for silver as a safe asset. This factor, coupled with domestic economic indicators, suggests that while silver may not experience dramatic price increases, it remains a crucial asset for investors seeking stability in uncertain times. Investors are advised to stay vigilant, monitoring both inflation data and global events to make informed decisions in the silver market.

Technical Analysis

The short, intermediate and long-term trends are up ahead of today’s PPI report with bullish traders hoping for news that signals a resumption of the current rally.

The short-term range is $29.80 to $26.02. XAG/USD is currently trading on the strong side of its pivot at $27.91, making this level support. Trader reaction to this level will set the tone for the day.

On the downside, the key support is the uptrending 50-day moving average at $26.47. This is followed by the short-term bottom at $26.02 that could be the trigger point for an acceleration to the downside.