Silver (XAG) Forecast: CPI and PPI in Focus as Traders Eye $28.22 Pivot

Silver Poised for Volatility as Key Economic Data Looms

Silver prices are edging higher, approaching a pivotal level of $28.22 as traders await crucial economic reports this week. The market’s recent price action reflects investor uncertainty, with silver trading between key technical levels.

At 11:11 GMT, XAG/USD is trading $28.12, up $0.18 or +0.65%.

Mixed Signals from Labor Market

Friday’s U.S. jobs report presented a complex picture for traders. While employment growth fell short of expectations, a lower jobless rate and solid wage growth indicated a gradual cooling of the labor market. This mixed data has left the Federal Reserve at a crossroads, complicating the decision between a 25 or 50 basis point rate cut at their upcoming meeting.

Inflation Data to Guide Fed’s Decision

The market’s focus now shifts to Wednesday’s U.S. Consumer Price Index (CPI) and Thursday’s Producer Price Index (PPI) reports. These inflation indicators could significantly influence the Fed’s rate decision and, consequently, silver prices. Currently, futures markets show a 35% probability of a 50 basis point cut, with a 75% chance of a 25 basis point reduction.

Treasury Yields and Rate Cut Expectations

Treasury yields have risen as investors anticipate the upcoming inflation data. The 10-year Treasury yield increased by 4 basis points to 3.751%, while the 2-year yield rose by nearly 5 basis points to 3.698%. These movements reflect the market’s evolving expectations for the Fed’s monetary policy.

Market Forecast

The short-term outlook for silver appears bullish, contingent on the upcoming economic data. If inflation figures come in lower than expected, raising hopes for a 50 basis point cut, silver prices could potentially reach a new high for the year. Even with a 25 basis point cut, which remains the consensus, silver prices are likely to maintain stability. Traders should closely monitor the CPI and PPI reports, as they will be crucial in determining silver’s price direction in the coming weeks.

Technical Analysis

XAG/USD is trading higher on Monday, but gains are being capped by a short-term pivot at $28.22.

A sustained move over $28.22 could trigger a surge into the 50-day moving average at $29.08.

The inability to overcome $28.22 could lead to a retest of the minor bottom at $27.71. If this fails then look for an extension into a longer-term pivot at $27.22, followed by the 200-day moving average at $26.67.