Silver Prices Rally Following More Hot Inflation Data

Key Insights

• Silver prices rally as a safe-haven asset amid soaring inflation.
• Benchmark yields moved higher following more hot inflation.
• Oil prices rose amid dead-end Russia-Ukraine talks.

Silver prices rallied for the sixth consecutive day as the lingering Russia-Ukraine conflict and hot inflation data generated safe-haven demand appeal. Benchmark yields extended gains as more hot inflation data countered rate hikes.

Oil prices continued to move higher due to stalling Russia-Ukraine peace talks. An increased supply of oil reserves by EIA member nations will not replace supply losses from Russia. A slight easing of China’s lockdown protocols due to the surge in COVID-19 increased demand and underpinned higher oil prices.

The producer price index, which measures the change in prices paid by producers, rose 11.2% y-o-y and 1.2% in March. Core PPI, which excludes food and energy, rose 0.9% month-over-month.

Economists’ expectations were for a 0.5% increase. Prices for final demand goods led with a 2.3% monthly rise. Services were up 0.9% compared to 0.3% in February. 

Elevated producer and consumer prices indicate spiraling inflation in the market. The Fed will continue to raise rates through hikes this year after increasing rates by a quarter basis point in March.

Technical Analysis

Silver prices are trading higher on the day, confirming an uptrend for the precious metal as a hedge against inflation. However, the precious metal faces further downside as the hawkish Fed plans to aggressively raise rates. Support is seen near the 10-day moving average of $24.83.

Resistance is near the March 24th high, near $25.845. A break higher would test the $26.00 level. Short-term momentum is positive as the fast stochastic had a crossover buy signal.

The medium-term momentum turns positive as the histogram prints positively with the MACD (moving average convergence divergence). The trajectory of the MACD histogram is in positive territory, which reflects the upward trend in price movement.