Silver (XAG) Forecast: CPI Looms as Silver Outlook Turns Cautious in Latest Silver News

Silver Dips as Traders Shift Focus from Jobs to Friday’s CPI

Spot Silver is lower on Thursday as traders continue to assess the impact of yesterday’s hotter-than-expected U.S. jobs report. The key issue is how will the Fed use this information to determine the timing of the next Fed rate cut.

In January, it hinted that the labor market is no longer the enemy, it’s inflation. So maybe we’re seeing a muted reaction to the Non-Farm Payrolls report because silver traders are more concerned about inflation, which means Friday’s consumer inflation report could be the news that moves silver prices out of its current tight range.

The Tighter the Range, the Bigger the Move

The thing is, the tighter they wind silver prices in a range, the more impact the inflation report will have on its short-term direction.

In my opinion, hotter-than-expected inflation data won’t just lead to an intraday selloff; it may lead to a takedown of the 50-day moving average and a test of Fibonacci support. And if it’s a scorcher, prices could even collapse toward last week’s multi-month low at $64.06.

Lower-than-expected inflation numbers could fuel a breakout rally into $92.20 to $92.87 resistance. Essentially, the market is expected to remain in a range, just a wider domain.

50-Day MA: The Line in the Sand

The 50-day moving average will be the key to the whole operation. Short-term traders may be viewing it as support and a trigger point for a breakdown. Longer-term traders may be viewing it as a value point along with the 200-day moving average.

For short-term traders, it’s all about the Fed. Data that moves the needle toward a March rate cut will be bullish, numbers that maintain the odds for a June rate cut will likely hold prices in a range, and hot numbers could push the rate cut into September while driving prices to the low end of the range or even lower.

The Warsh Factor and China Demand Wildcards

Last year, silver exploded to the upside, starting the year near $29 and rising nearly $70 by year-end before trading a little over $120 by the end of January. Then on January 30, President Trump nominated Kevin Warsh as the next Fed chair. The wheels fell off the rally bus when prices crashed over 30% on that news.

Warsh takes over in June, just in time for the June monetary policy meeting. The jury is still out as to what he brings to the table. Will he give in to Trump’s demands for lower rates, or will he hold them steady to ward off higher inflation? Another wild card is China demand. Will investment demand accelerate?

I think the long-term support provided by central bank buying will remain intact, but the short-term volatility and direction won’t be determined until the Fed uncertainty is lifted.

More Information in our Economic Calendar.