Silver (XAG) Forecast: Bullish Momentum Hinges on CPI Data and 50-Day MA Support

Silver Faces Resistance as Key Economic Data Looms

Silver prices faltered on Tuesday following a robust rally earlier in the week. Price action signals a significant resistance level within the $32.26 to $32.87 retracement zone, while the 50-day moving average at $31.72 has emerged as a critical support point. A break below this threshold could drive prices lower toward key pivot levels at $31.29 and $30.61.

Despite short-term volatility, the 50-day moving average remains pivotal in maintaining the intermediate uptrend. Traders are closely watching this level as silver attempts to consolidate gains from its recent surge.

At 13:48 GMT, XAG/USD is trading $31.85, up $0.02 or +0.05%.

Fed Rate Cut Speculation Lifts Precious Metals

Silver’s appeal has been bolstered by expectations of a Federal Reserve rate cut in December, fueled by last week’s U.S. jobs report. The CME FedWatch tool indicates an 86% probability of a 25-basis-point cut, up from 73% last week. Lower interest rates tend to favor silver, as reduced yields decrease the opportunity cost of holding non-yielding assets.

However, attention now shifts to the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data due Wednesday and Thursday. A hotter-than-expected CPI print could dampen expectations for further rate cuts beyond December, potentially limiting silver’s upside momentum.

China’s Renewed Gold Buying and Stimulus Measures

China’s central bank resumed gold purchases in November, raising reserves to 72.96 million fine troy ounces after a six-month pause. This signals renewed commitment to precious metals amid Beijing’s pivot to looser monetary policy and plans for more proactive fiscal measures in 2024. Industrial demand for silver may also benefit from these stimulus initiatives, adding support to prices.

Geopolitical Tensions Add a Safe-Haven Premium

Rising geopolitical risks, including heightened tensions in the Middle East, have bolstered silver’s safe-haven appeal. Reports of Israeli military activity in southern Syria and near Damascus underscore the metal’s role as a hedge against uncertainty.

Market Forecast

Silver prices are expected to remain bullish in the short term if they hold above the 50-day moving average at $31.72. China’s renewed gold purchases, combined with fiscal stimulus, are likely to underpin demand for precious metals. Elevated geopolitical risks also provide a solid foundation for safe-haven flows.

However, stronger-than-anticipated U.S. inflation data could challenge this outlook by tempering expectations for prolonged Federal Reserve easing. Traders should monitor the CPI and PPI reports closely for potential market-moving developments.

More Information in our Economic Calendar.