Silver (XAG) Forecast: Silver Market at Crossroads – Will 50-Day MA Spark a Breakout?

Silver Prices Edge Higher as Fed Rate Cut Looms

Silver prices advanced on Thursday as traders anticipate a potential rate cut from the U.S. Federal Reserve. The market expects a 25-basis-point reduction, following the marginal increase in U.S. consumer prices for August. However, sticky core inflation may limit the extent of the cut.

At 11:37 GMT, XAG/USD is trading $29.58, up $0.03 or +0.09%.

Breaking Down the Technical Barriers

Silver is currently trading just below the critical 50-day moving average at $28.99. This level serves as a key resistance and potential trigger point for upward momentum. A breakthrough could propel prices towards the next target of $30.19. Conversely, rejection at this level might push silver down to the pivot at $28.22, with the 200-day moving average at $26.72 acting as further support.

Inflation Data Fuels Market Uncertainty

The U.S. Consumer Price Index (CPI) for August reported a 0.2% monthly increase, aligning with forecasts. However, core inflation exceeded expectations, rising by 0.3%. This development has raised concerns about persistent inflationary pressures, potentially influencing silver’s outlook.

U.S. Treasury yields climbed slightly on Thursday, with the 10-year yield rising over 2 basis points to 3.678% and the 2-year yield reaching 3.672%. These higher yields could cap silver’s upside potential, as they compete with precious metals for safe-haven investments.

Economic Indicators Set to Shape Silver’s Path

Traders are closely monitoring upcoming U.S. economic data, including the Producer Price Index (PPI), initial jobless claims, and consumer sentiment reports. These indicators will provide crucial insights into inflation trends and overall economic conditions.

The European Central Bank (ECB) is expected to announce a 25-basis-point rate cut, marking its second reduction this year. This decision could indirectly impact silver prices through its effect on EUR/USD exchange rates.

Silver’s Crossroads: Bullish Breakout or Bearish Retreat?

The short-term direction for silver (XAG/USD) hinges on trader reactions to the 50-day moving average at $28.99. If the Fed proceeds with the anticipated 25-basis-point cut, prices may consolidate around the $28.22 pivot. However, inflation concerns and rising Treasury yields could limit substantial gains.

A bearish outlook may emerge if inflation data remains elevated, increasing the likelihood of prolonged higher interest rates. Conversely, signs of slowing inflation could strengthen silver’s position, potentially triggering a breakout above the 50-day moving average, with $30.19 as the next target.

Traders should remain vigilant, closely monitoring upcoming U.S. economic releases for further insights into silver’s next significant move.