Silver Prices Forecast: Traders Flee XAG/USD Amid Fed Rate Cut Uncertainty

Silver Prices Retreat as PPI Data Offsets CPI-Driven Rally

Silver prices are trending lower on Friday, retreating from Thursday’s peak levels last seen on May 31. The market is poised to end the week in negative territory, primarily due to the impact of today’s hotter-than-expected Producer Price Index (PPI) report.

At 13:04 GMT, XAG/USD is trading $30.59, down $0.86 or -2.74%.

CPI Data Fuels Rate Cut Optimism

Thursday saw silver prices surge to nearly two-month highs following an unexpected decline in U.S. Consumer Price Index (CPI) data. The surprise dip in inflation metrics bolstered investor confidence that the Federal Reserve might be inching closer to interest rate cuts, potentially as early as September.

PPI Report Dampens Enthusiasm

However, Friday’s PPI report, showing a 0.2% increase in wholesale prices for June, slightly exceeded expectations. This data has prompted some traders to book profits and reassess their positions, introducing uncertainty about the Fed’s next moves.

Treasury Yields React

U.S. Treasury yields edged higher on Friday in response to the PPI data. The 10-year Treasury yield rose by over 2 basis points to 4.21%, although it remains on track for a significant weekly decline following Thursday’s CPI-induced drop.

Fed Officials Signal Potential Easing

Recent comments from Fed officials have added to the market’s dovish expectations. San Francisco Fed President Mary Daly suggested that further easing in both prices and the labor market could warrant interest rate cuts. Similarly, Chicago Fed President Austan Goolsbee expressed optimism about the U.S. economy’s trajectory toward 2% inflation.

Market Forecast

The silver market is experiencing a significant downturn, with prices plummeting rapidly. The bullish momentum from the CPI report has been completely overshadowed by the PPI data, leading to a sharp reversal in market sentiment. Traders are aggressively selling off their positions, causing a cascade effect in prices.

The short-term outlook for silver appears decidedly bearish, with the potential for further downside as market participants continue to digest the conflicting economic signals. Key support levels are likely to be tested in the coming sessions. Investors should brace for increased volatility and potentially steeper declines.

The market may find temporary support at critical price levels, but the overall trend points to continued weakness in the immediate future. Traders are advised to exercise caution and closely monitor incoming economic data and Fed communications, as these factors could either exacerbate or potentially stabilize the current sell-off.

Technical Analysis

XAG/USD is under pressure on Friday. Sellers are hitting the market hard, leading to a dramatic shift in market sentiment. The market is currently straddling a pivot at $30.59. A sustained break under this level will lead to more selling pressure with the 50-day moving average at $29.93 the next major target.

The direction of the market into the close today will be determined by trader reaction to the $30.59 pivot.