XAG/USD nears $29 ahead of US PPI, jobless claims

VaselineSeptember 12, 2024

0 3 minutes read

XAG/USD nears ahead of US PPI, jobless claims

Silver moves higher towards $29 even as traders cut bets on high Fed rates.
US dollar and bond yields rise as US CPI data for August shows signs of firming.
Investors await US PPI data and initial jobless claims data.

The price of silver (XAG/USD) is rising towards the crucial $29.00 resistance in Thursday’s European session. The white metal is up slightly despite investors looking confident that the Federal Reserve (Fed) will begin to gradually cut interest rates by 25 basis points (bps) to 5.00%-5.25% this month.

Market speculation that the Fed would begin aggressively cutting its key lending rates eased significantly as Wednesday’s United States (US) consumer price index (CPI) data for August showed signs tenacity of inflationary pressures. Annual core US inflation – which excludes volatile food and energy prices – rose in line with estimates and the previous release of 3.2%.

Falling market expectations for a 50 bps Fed rate cut lifted US dollar (USD) and bond yields. The US Dollar Index (DXY), which tracks the greenback against six major currencies, is clinging to gains near 101.70. US 10-year Treasury yields rise to 3.67%. In general, higher yields on interest-bearing assets weigh on the price of silver, as they increase the opportunity cost of holding an investment in non-yielding assets such as silver. But in this case, the price of Silver remains firm.

Going forward, investors will focus on US producer price index (PPI) data for August, which will be released at 12:30 GMT. Core PPI is estimated to have increased further. At the same time, investors will also focus on US initial jobless claims data for the week ending September 6.

The significance of jobless claims data has grown in recent weeks as recent comments from a string of Fed officials signal that the central bank has become more concerned with preventing job losses.

Silver Technical Analysis

Silver price has been trading in a limited range of $27.70-$28.20 for more than a week. The white metal’s upside remains capped by the 200-period exponential moving average (EMA), which is trading around $28.80.

The 14-period Relative Strength Index (RSI) is hovering in the range of 40.00-60.00, showing a sideways trend.

Silver Four Hour Chart

Frequently asked questions about silver

Silver is a highly traded precious metal among investors. It has historically been used as a store of value and medium of exchange. Although less popular than gold, traders can turn to silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during periods of high inflation. Investors can buy physical silver, in coins or bullion, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can cause the price of silver to escalate due to its safe-haven status, although to a lesser extent than gold. As a non-yielding asset, silver tends to rise with lower interest rates. Its movements also depend on how the US dollar (USD) behaves, as the asset is valued in dollars (XAG/USD). A strong dollar tends to keep silver prices at bay, while a weaker dollar is likely to propel prices higher. Other factors such as investment demand, mining supply – silver is much more abundant than gold – and recycling rates can also affect prices.

Silver is widely used in industry, especially in sectors such as electronics or solar energy, because it has one of the highest electrical conductivity of all metals – more than copper and gold. An increase in demand can raise prices, while a decrease tends to lower them. Dynamics in the US, Chinese and Indian economies may also contribute to price fluctuations: for the US and especially China, their large industrial sectors use silver in various processes; in India, consumer demand for the precious metal for jewelry also plays a key role in pricing.

Silver prices tend to follow the movements of gold. When gold prices rise, silver usually follows suit, as their safe haven asset status is similar. The gold/silver ratio, which shows the number of ounces of silver needed to equal the value of one ounce of gold, can help determine the relative valuation between both metals. Some investors may view a high ratio as an indicator that silver is undervalued or that gold is overvalued. Conversely, a low ratio could suggest that gold is undervalued relative to silver.

VaselineSeptember 12, 2024

0 3 minutes read

Silver Technical Analysis

Silver Four Hour Chart

Frequently asked questions about silver

Vaseline

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