Silver Prices Surge After US PPI Data Release
On Friday, the price of silver (XAG/USD) climbed to near $31.50 in the New York session following the release of the US Producer Price Index (PPI) data for September. This surge in the white metal’s value occurred while the US Dollar (USD) remained relatively stable, with the US Dollar Index (DXY) fluctuating around 103.00.
Key Points from the PPI Report:
- The annual headline producer inflation grew by 1.8%, surpassing expectations of 1.6%.
- The annual core PPI, excluding volatile food and energy prices, accelerated to 2.8%, higher than the anticipated 2.7%.
- The month-on-month headline producer inflation remained flat, indicating potential for further interest rate cuts by the Federal Reserve (Fed).
The CME FedWatch tool suggests that the Fed is likely to reduce borrowing rates by 25 basis points to 4.50%-4.75% in November, following the 50-basis point cut in September. This decision stems from concerns over job market risks and the Fed’s goal to achieve sustainable price pressures at their 2% target.
Silver Technical Analysis
After surpassing the horizontal resistance from the September 30 low of $31.30, silver is expected to find support at this level. The current outlook is positive as the price has moved above the 20-period Exponential Moving Average (EMA) at $31.50, with a potential upside target around $33.00. Additionally, the 14-period Relative Strength Index (RSI) is nearing 60.00, suggesting a bullish momentum if the RSI crosses this threshold.
Silver Four-Hour Chart
Silver FAQs
Silver is a precious metal that investors often trade for its intrinsic value and as a potential hedge during periods of high inflation. Investors can purchase physical silver in the form of coins or bars or trade it through Exchange Traded Funds that track its price on international markets.
Factors Influencing Silver Prices:
- Geopolitical instability or recession fears can drive up silver prices due to its safe-haven status.
- Silver tends to rise with lower interest rates, as it is a yieldless asset.
- The price of silver is influenced by the strength of the US Dollar (USD) as silver is priced in dollars (XAG/USD).
- Other factors such as investment demand, mining supply, and recycling rates can also impact silver prices.
Industrial Use of Silver:
- Silver is widely used in industries like electronics and solar energy due to its high electric conductivity.
- Changes in demand from major economies like the US, China, and India can affect silver prices.
Relationship with Gold:
- Silver prices often follow gold prices, as both are considered safe-haven assets.
- The Gold/Silver ratio can help determine the relative valuation between the two metals.