Silver Prices Remained Little Changed Amid the Dollar Easing and Hot Inflation Report

Key Insights

• Silver prices traded flat as the release of Core PCE data reaffirmed the Fed’s plan for aggressive rate hikes. 
• Treasury yields traded flat amid PCE data signaling spiraling inflation.
• Oil prices rose as concerns over the Russian oil supply offset fears of demand due to lockdowns in China.

Silver prices stabilized as the dollar pulled back despite the Fed’s plan for rate tightening in May. The dollar eased from its 20-year highs as investors took profit since it is the final day of trading in the month.

However, the imminent 50-basis point Fed rate hike underpins a stronger dollar and a bullish outlook. Treasury yields remain little changed following the release of a hot inflation report.

Gold prices move higher as the dollar pulls back. Although gold prices are on track for a monthly drop, economic weakness and stock volatility underpin gold prices as a safe-haven asset.

Volatile oil prices rose due to ongoing fears of a disruption in Russian oil supply. However, oil market volatility is set to continue amid concerns over demand from China’s ongoing lockdowns.

Core PCE, which is the Fed’s preferred inflation gauge and excludes food and energy, increased by 5.2% in March year-over-year.

The employment cost index, which measures the compensation cost for nongovernment workers, rose by 1.4%, and real disposable income declined by 0.4%. PCE soared to 6.6% year-over-year, the fastest pace since 1982.  

The rise in inflation at a faster pace than the Fed would like reaffirms the Fed’s plan to tighten rates at its imminent meeting in May. Ongoing rate hikes would rein in spiraling inflation.

Technical Analysis

Silver prices hold steady near the low $23 level. The imminent rate hike signals a bearish outlook and selling pressure for the precious metal. Silver prices pulled back to below the $23.00 level before rebounding.

Support is seen near the November 2021 lows near $23.00. Resistance is seen near the 200-day moving average of 23.81. Short-term momentum is turning negative as the fast stochastic might have a crossover sell signal.

The medium-term momentum turned negative as the histogram prints negatively with the MACD (moving average convergence divergence).

The trajectory of the MACD histogram is in negative territory, which reflects the downward trend in price movement.