Silver (XAG) Forecast: Bearish Sentiment Lingers as Inflation Data Looms

Silver Slips as Traders Hold Their Breath for Inflation Data

Silver prices retreated on Tuesday, facing resistance at a short-term pivot of $27.85. This decline comes as traders anticipate key U.S. inflation reports that could influence the Federal Reserve’s monetary policy decisions.

At 11:30 GMT, XAG/USD is trading $27.78, down $0.18 or -0.64%.

Gold Glitters, Silver Struggles

While gold recently hit an all-time high of $2,483.60 on July 17, silver has struggled to maintain momentum. Non-yielding silver remains up for the year but has failed to match gold’s 19% year-to-date gain. The precious metals market is currently focused on upcoming U.S. economic data, with producer price index (PPI) figures due later today and consumer price index (CPI) numbers expected on Wednesday.

Fed’s Next Move: Rate Cut or Hold Steady?

Treasury yields held steady on Tuesday, with the 10-year yield at 3.919% and the 2-year yield at 4.021%. Markets are pricing in a 50% chance of a 50-basis point rate cut in September, according to the CME FedWatch Tool. The Federal Reserve’s next moves are crucial, as recent market volatility has raised questions about the timing of potential rate cuts to avoid a hard landing.

Middle East Tensions Heat Up

Escalating Middle East tensions following the killing of Hamas leader Ismail Haniyeh in Iran have prompted the U.S. to bolster its military presence in the region. This development adds another layer of uncertainty to the precious metals market.

Silver’s Tug-of-War: Weak Demand vs. Technical Potential

Industrial demand in China, the world’s top consumer, remains subdued due to high prices and a slowing economy. From a technical perspective, silver’s price action suggests potential volatility ahead. The metal remains vulnerable below its 200-day moving average at $26.15, but it has room to run up to the 50-day moving average at $29.32.

Silver’s Outlook: Bearish Clouds with a Chance of Chinese Sunshine

The short-term outlook for silver appears bearish, with prices likely to remain under pressure until Chinese demand shows signs of recovery. However, upcoming economic reports from China could potentially trigger a price surge if they indicate an economic turnaround. Traders should remain alert to these key data points and their potential impact on silver prices, while also monitoring the metal’s technical levels for trading opportunities.

Technical Analysis

XAG/USD is currently straddling a short-term pivot at $27.85. Trader reaction to this level is likely to determine the near-term direction of silver.

A sustained move over $27.85 could create the upside momentum needed to challenge the downtrending 50-day moving average at $29.32, followed closely by another key 50% level at $29.50.

The $29.32 to $29.50 is the last potential resistance area standing in the way of a challenge of $31.76 to $32.52.

A sustained move under $27.85 will be a sign of weakness. This could lead to a quick drop to $27.22. The major support cluster is formed by the main bottom at $26.47 and the uptrending 200-day moving average at $26.15.