Silver (XAG) Forecast: Eyes on $29.21 as Retail Sales Data Looms – Market Analysis

Silver Prices Hovering Near Key Pivot Point as Market Awaits Economic Data

Silver prices are showing resilience on Thursday, trading above a key short-term pivot at $27.85. This level is crucial as investors anticipate a potential move towards the 50-day moving average of $29.21, a key target if upward momentum continues. This development follows a 1.04% drop in the previous session, which was driven by U.S. consumer inflation data that dampened expectations for a significant interest rate cut by the Federal Reserve in September.

At 10:50 GMT, XAG/USD is trading $28.06, up $0.50 or +1.81%.

CPI Data and Market Reaction

Wednesday’s release of the U.S. Consumer Price Index (CPI) revealed a moderate increase in July, with annual inflation falling below 3% for the first time since early 2021. While this data supports the case for a rate cut, it also suggests that a large reduction is unlikely, tempering market expectations. The initial reaction led to a sell-off in silver, as traders reassessed the likelihood of aggressive monetary easing. However, some market participants believe the response was overly negative, contributing to the slight recovery in silver prices seen during the Asian trading session.

Focus on U.S. Retail Sales and China’s Economic Outlook

Market participants are now turning their attention to the upcoming U.S. retail sales data, due on Thursday. Economists forecast a 0.3% increase for July, following strong results in the previous month. This data will be critical in shaping expectations for future Fed actions. A strong retail sales report could further diminish hopes for a significant rate cut, potentially limiting silver’s upside.

Meanwhile, concerns about China’s economic slowdown continue to weigh on the silver market. July data showed a mixed performance, with industrial output slowing to 5.1% growth and retail sales rising 2.7%. Analysts suggest that while consumer spending shows signs of improvement, the broader economic outlook remains uncertain, with sluggish property and industrial sectors.

Short-Term Market Forecast

Given the mixed economic signals from both the U.S. and China, silver prices may remain volatile in the near term. While a technical move towards $29.21 is possible, the strength of upcoming U.S. economic data will be crucial. The market’s response to retail sales figures, along with ongoing concerns about China’s economic health, will likely determine whether silver can sustain its current momentum or faces renewed pressure. In the long run, geopolitical risks and central bank demand for precious metals continue to support a cautiously bullish outlook for silver.

Technical Analysis

XAG/USD is currently trading on the strong side of the pivot at $27.85. If buyers can build on this move throughout the session, there is a near-term chance of a surge into the 50-day moving average at $29.21, followed by another pivot at $29.50. These two resistance levels are standing in the way of an acceleration into the pair of main tops at $31.76 and $32.52.

Crossing to the weak side of the pivot can lead to renewed selling pressure and an eventual test of the 200-day moving average at $26.20.