Silver (XAG) Forecast: Hot PPI Stops Silver Rally, Eyes on Jackson Hole as Fed Cuts in Doubt

Silver stalls below $39 as inflation data reignites rate hike fears

Silver prices are retreating on Thursday, pulling back from a short-lived rally that stalled at $38.74. That level now marks immediate resistance, while the 14-year high at $39.53—hit on July 23—remains the more decisive ceiling for bullish momentum. After two sessions of strength, the reversal signals hesitation as traders weigh renewed inflation risks and recalibrate Fed policy expectations.

At 13:24 GMT, XAG/USD is trading $38.19, down $0.31 or -0.81%.

Technically, the $37.87 level—the 50% retracement of the recent upswing—is the first line of support. Below that, $37.51 and the 50-day moving average at $37.30 represent key levels where dip buyers may re-enter. If those fail to hold, attention shifts to the July 31 low at $36.21, which could come into play if longer-term conditions further weaken sentiment.

PPI surprise triggers concerns over inflation stickiness

The Bureau of Labor Statistics’ July Producer Price Index shocked markets with a 0.9% month-over-month rise—well above the 0.2% forecast and the sharpest increase since June 2022. Core PPI also climbed 0.9%, while the annual headline rate hit 3.3%, far above the Fed’s 2% target.

Silver, often used as an inflation hedge, can initially benefit from hotter inflation readings. However, this report was viewed as increasing the likelihood that the Fed may delay or limit rate cuts, which hurts silver in two key ways: higher rates raise opportunity costs of holding non-yielding assets like silver, and a stronger dollar (often tied to hawkish Fed policy) typically pressures precious metals lower. The net effect Thursday was bearish.

Fed rate cut odds trimmed, hurting precious metals

Markets had largely priced in a September rate cut following this week’s CPI release, which came in near expectations. But Thursday’s PPI data disrupted that view. The CME FedWatch Tool now shows a modest decrease in the probability of a cut next month.

Treasuries responded accordingly. The 2-year yield rose to 3.718%, up 3.1 basis points, while the 10-year yield held around 4.252%. Rising short-term yields tighten financial conditions, reinforcing downward pressure on silver by making it less attractive relative to interest-bearing assets.

Jackson Hole could be decisive for silver’s next move

With conflicting inflation signals in play, traders are looking to the Fed’s Jackson Hole Symposium next week for clarity. The event has a track record of signaling monetary policy direction—last year, Chair Powell used it to pivot toward easing. If policymakers strike a hawkish tone in response to the PPI data, silver may face further downside. Conversely, any dovish rhetoric could reignite the bid in precious metals.

Market Forecast: Silver at risk of deeper pullback below $37.30

The rejection at $38.74, combined with a deteriorating Fed rate cut outlook, leaves silver vulnerable in the near term. Traders will be watching the $37.87 pivot and the 50-day moving average at $37.30 closely. A break below that could trigger a flush toward $36.21.

Until there’s clearer Fed guidance or a softer inflation signal, silver’s upside appears capped, with the market likely consolidating or correcting further in the sessions ahead.

More Information in our Economic Calendar.