XAG/USD Climbs Amidst Dollar Downturn, CPI Anticipation

Silver Prices and Dollar Retreat

Spot silver (XAG/USD) leapt by 0.61% to $23.09 per ounce on Monday, erasing a small portion of last week’s loss. U.S. silver futures weren’t far behind, climbing 0.85% to settle at $23.37. These gains were driven by a softer dollar, and the ascent may hold above the $22 mark if the U.S. currency continues its downturn.

Technical Barriers and Inflation Watch

The technical outlook suggests hurdles ahead for silver. Both the 50-4H and 200-4H moving averages pose resistance levels that need to be overcome for a sustained rally. Meanwhile, market analysts are closely watching U.S. inflation data due for release on Wednesday. The Consumer Price Index (CPI) figures could weigh heavily on the Federal Reserve’s next move on interest rates, adding another layer of volatility to the silver market.

The Dollar’s Trajectory and Federal Reserve’s Policy

The dollar is displaying remarkable resilience, heading for its longest weekly winning streak since 2014, thanks mainly to robust U.S. economic data. This backdrop has kept silver traders on edge as they await the Federal Reserve’s policy decision on September 20, following U.S. inflation data due on September 13.

Safe Haven Appeal of Silver

Despite strong inflows into the dollar and U.S. Treasuries, silver remains an attractive safe haven for investors. If the Federal Reserve’s primary inflation gauge—the personal consumption expenditures price index—remains sticky, persistent inflation coupled with a potential economic slowdown could elevate silver’s status among other safe havens.

Short-Term Outlook

Traders currently see a 93% chance of the Federal Reserve holding rates steady this September and a 43% likelihood of a rate hike before 2024. Given the technical and fundamental landscape, the market sentiment for silver seems cautiously bullish over the long-run after experiencing a recent sell-off, hinging on upcoming U.S. inflation data and Federal Reserve policy decisions.

Technical Analysis

Spot Silver (XAG/USD) is currently trading at $23.11, closely aligning with its previous 4-hour price. When compared with key moving averages, it’s positioned below both the 200-4H MA ($23.61) and the 50-4H MA ($23.79), signaling potential bearish momentum. The 14-4H RSI stands at 40.18, suggesting a weakened momentum but not yet oversold territory.

Defining our boundaries, the primary support is set between $22.70 to $22.28, while the main resistance zone spans from $25.00 to $25.27. Given its positioning under both moving averages and the RSI’s inclination, the current market sentiment leans towards the bearish side.