Silver Prices Tumble Despite Surging Inflation

Silver prices continued to move lower on Friday for the sixth consecutive day of losses ahead of growing expectations for a rate hike. The US dollar is on track for its largest weekly rise in seven months following the Fed’s signal. As the US dollar soars, gold prices tumbled as the metal becomes more expensive for overseas buyers. US stocks saw massive swings this week and huge intraday movements due to tightening expectations. Benchmark yields dipped following the 4.9% gain on December’s Personal Consumption Expenditures Index, the Fed’s key inflation gauge.  

Technical Analysis

On Friday, silver prices tumbled in the wake of the Fed decision, testing December lows. Prices broke below the support level seen near an upward sloping trend line near 22.49.  Resistance is seen near the 50-day moving average at 22.95. Short-term momentum is negative as the fast stochastic is printing a reading of 2.84, plunging below the oversold trigger of 20. Prices are oversold. Medium-term momentum turned negative as MACD (moving average convergence divergence) index crossover indicates a sell signal. This scenario occurs when the MACD line (the 12-day moving average minus the 26-day moving average) crossed over the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints in negative territory with a downward sloping trajectory pointing to lower prices.

December PCE Gauge Shows Inflation is Soaring

December’s PCE gauge showed that prices rose by 5.8% year-over-year and the core PCE was up 4.9%. This is the biggest surge in inflation in decades. Although incomes rose by 7.3% in 2021, it is not enough to offset the increase in inflation. Further government stimulus is also unlikely.