Silver (XAG) Forecast: Prices Climb as US Inflation Data Looms – Is $32.52 in Sight?

Silver Prices Edge Higher as Markets Await US Inflation Data

Silver prices inched up on Monday as traders anticipate key US inflation data this week. The market is closely watching for signs that could influence the Federal Reserve’s next move on interest rates.

At 11:33 GMT, XAG/USD is trading $27.91, up $0.45 or +1.65%.

Rate Cut Expectations

Investors are currently pricing in a 49% chance of a 50 basis point rate cut by the Federal Reserve in September, according to CME Group’s FedWatch tool. This optimism stems from recent economic indicators and comments from Fed officials.

Fed Governor Michelle Bowman noted “welcome” progress on inflation, though she maintained that it remains above the 2% target. This slight softening of her typically hawkish stance has fueled speculation about potential rate cuts.

Upcoming Economic Data

Traders are focused on several key economic releases this week:

• Producer Price Index (PPI) on Tuesday
• Consumer Price Index (CPI) on Wednesday
• Retail sales figures on Thursday
• Housing starts data on Friday

These reports will provide crucial insights into inflation trends, consumer spending, and the overall health of the US economy.

Geopolitical Factors

Heightened geopolitical tensions are providing additional support for silver prices. Recent developments include:

• Russia evacuating civilians from areas bordering Ukraine
• Ongoing negotiations for a Gaza ceasefire deal

These factors contribute to market uncertainty, potentially boosting demand for precious metals as safe-haven assets.

Market Forecast and Technical Outlook

The short-term outlook for silver remains cautiously bullish. If US inflation data comes in below market expectations, it could strengthen the case for more aggressive rate cuts, potentially pushing silver towards its multi-year high of $32.52.

However, silver’s technical position appears less robust compared to gold. The next major resistance level is the 50-day moving average at $29.36. Traders should be prepared for increased volatility following the release of inflation figures.

The market’s reaction to this data will likely determine whether expectations shift towards a 25 or 50 basis point cut in September, significantly impacting silver prices in the near term. A break above the 50-day moving average could signal further upside potential, while failure to surpass this level may lead to consolidation or a pullback.

Technical Analysis

XAG/USD is trading higher on Monday, but facing headwinds at a minor pivot at $27.89. This level is critical to the near-term direction of the market.

Overtaking $27.89 could generate some strong upside momentum with the daily chart indicating a clear shot at a resistance cluster formed by a main top at $29.23, the 50-day moving average at $29.36 and a major pivot at $29.50. The area stands in the way of the July top at $31.76 and the May top at $32.52.

On the downside, minor support comes in at $27.22. The main bottom is $26.47 and the 200-day moving average at $26.13. This is controlling the long-term direction of the silver market.