Silver (XAG) Daily Forecast: Bullish at $28.38, Ascending Channel Supports Buying

Fed Caution and Weak Consumer Sentiment Support Silver Amid Dollar Strength

The US dollar maintained its upward trend, driven by hawkish remarks from Federal Reserve (Fed) officials who emphasized the need to keep interest rates higher amid elevated inflation. Fed Vice Chair Philip Jefferson echoed this sentiment, advocating for maintaining current rates until inflation eases more noticeably.

Investors are closely watching the Producer Price Index (PPI) report, which could influence market sentiment. A survey by the Federal Reserve Bank of New York showed that US consumers expect inflation to accelerate over the next year, with expectations reaching 3.3%.

Neel Kashkari, President of the Minneapolis Federal Reserve, expressed caution about tightening monetary policy, while San Francisco Fed President Mary Daly stressed the importance of maintaining a restrictive policy to achieve the Fed’s inflation goals.

On the data front, the University of Michigan Consumer Sentiment Index dropped to 67.4 in May from 77.2 in April, hitting a six-month low and missing the expected 76 reading. Meanwhile, the UoM 5-year Consumer Inflation Expectation rose to 3.1%, a six-month high, up from 3.0%.

Looking ahead, the US PPI for April is anticipated to rise by 2.2% year-over-year (YoY), with the Core PPI expected to increase by 2.4% YoY. Additionally, US Consumer Price Index (CPI) inflation is forecasted to ease to 3.4% YoY in April from 3.5%, while Core CPI inflation is projected to drop to 3.6% YoY from 3.8% in March.

Geopolitical Escalation Spurs Safe-Haven Demand for Silver

On the geopolitical front, Israeli soldiers moved into Gaza’s northern area to reclaim territory from Hamas militants on Monday while also pushing into Rafah with tanks and troops, causing Palestinian residents to flee, according to the latest news.

Hence, the escalation of conflict between Israeli soldiers and Hamas militants, along with the displacement of Palestinian residents, increased geopolitical tensions, boosting demand for safe-haven assets like silver.