Silver Price Forecast: XAG/USD stays on sidelines around $28.60 ahead of US Inflation data

• Silver price exhibits strength amid soft US Dollar ahead of US CPI data.
• US consumer inflation remained stubbornly higher in the first three months of this year.
• US bond yields drop amid firm speculation that the Fed will pivot to policy normalization from September.

Silver price (XAG/USD) trades in a confined range around $28.60 in Wednesday’s European session. The white metal clings to gains inspired by the soft US Dollar, which fell sharply despite the release of the hot United States Producer Price Index (PPI) inflation report for April.

Annual PPI figures grew expectedly while monthly figures beat expectations. The US Dollar Index (DXY) dips sightly below 105.00. The appeal for dollar-denominated Silver improves due to soft Greenback. After the release of the PPI report, Federal Reserve (Fed) Jerome Powell commented that the overall data was mixed.

When asked about the inflation outlook, Powell ruled out the likelihood of more rate hikes but emphasized keeping the monetary policy restrictive for a longer period to bring inflation down. 10-year US Treasury yields drop further to 4.43% as traders remain confident that the Fed will start lowering interest rates from the September meeting. Generally, falling yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver.

Meanwhile, investors await the US Consumer Price Index (CPI) and monthly Retail Sales data for April, which will be published at 12:30 GMT. The economic indicators will significantly influence speculation for Fed rate cuts.

US consumer inflation has remained stubbornly higher in the first quarter of the year. A higher-than-projected US inflation report will deepen fears that the last mile to the 2% inflation road is significantly more persistent than what was previously anticipated.

Silver technical analysis

Silver price recovers sharply after discovering buying interest near the horizontal support plotted from 14 April 2023 high around $26.09 on a daily timeframe. The above-mentioned support was earlier a major resistance for the Silver price bulls. The white metal is approaching the multi-year high at $29.80.

The near-term outlook of Silver has improved as it returns above the 20-period Exponential Moving Average (EMA), which trades around $27.30.

The 14-period Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, suggesting that a bullish momentum has been triggered.

Silver daily chart