In today’s European session, the price of silver (XAG/USD) is making significant gains as it edges closer to the key resistance level of $29. This upward movement comes as traders scale back their expectations of a large rate cut by the Federal Reserve (Fed).
Following the release of the US Consumer Price Index (CPI) data for August, which showed signs of inflationary pressures holding steady, market speculation of an aggressive Fed rate cut has decreased. The annual US core inflation rate remains at 3.2%, in line with estimates and previous figures.
As expectations for a 50 basis points rate cut diminish, the US Dollar (USD) and bond yields are on the rise. The US Dollar Index (DXY) is maintaining gains near 101.70, while 10-year US Treasury yields have reached 3.67%. Typically, higher bond yields can dampen silver prices by increasing the opportunity cost of holding non-yielding assets. However, silver prices are holding strong in this scenario.
Looking ahead, investors are awaiting the release of the US Producer Price Index (PPI) data for August and the Initial Jobless Claims data for the week ending September 6. Recent comments from Fed officials indicate a heightened concern for preventing job losses, making the jobless claims data particularly significant.
Technical Analysis of Silver
Silver is currently trading within a narrow range of $27.70-$28.20, with the 200-period Exponential Moving Average (EMA) acting as a resistance level around $28.80. The 14-period Relative Strength Index (RSI) is moving sideways in the 40.00-60.00 range.
Four-Hour Chart Analysis
Silver FAQs
What You Need to Know About Silver
Silver is a precious metal often traded by investors for its store of value and potential hedge during high-inflation periods. It can be purchased in physical form or traded through Exchange Traded Funds to diversify investment portfolios.
Silver prices can be influenced by geopolitical instability, interest rates, US Dollar performance, industrial demand, and recycling rates. It is widely used in industries like electronics and solar energy due to its high conductivity.
Silver prices tend to follow gold’s movements, with the Gold/Silver ratio providing insights into relative valuations. A high ratio may indicate undervalued silver, while a low ratio could suggest undervalued gold.
Analysis and Conclusion
The surge in silver prices towards $29 despite reduced expectations of a large Fed rate cut reflects changing market dynamics and investor sentiment. As the US economy navigates uncertainties, silver remains a valuable asset for diversification and potential gains. Understanding the factors driving silver prices can help investors make informed decisions to protect and grow their wealth.