Silver Price Forecast: XAG/USD approaches $29 ahead of US PPI, jobless claims

• Silver price moves higher towards $29 even though traders pare Fed large rate cut bets.
• The US Dollar and bond yields rise as the US CPI data for August shows signs of stickiness.
• Investors await the US PPI and the Initial Jobless Claims data.

Silver price (XAG/USD) edges higher towards the crucial resistance of $29.00 in Thursday’s European session. The white metal rises slightly despite investors seem confident that the Federal Reserve (Fed) will start reducing interest rates gradually by 25 basis points (bps) to 5.00%-5.25% this month.

Market speculation for the Fed starting to reduce its key borrowing rates aggressively has diminished significantly as Wednesday’s United States (US) Consumer Price Index (CPI) data for August showed signs of stickiness in inflationary pressures. Annual US core inflation - which excludes volatile food and energy prices – rose in line with estimates and the prior release of 3.2%.

Declining market expectation for Fed interest rate cut by 50 bps has uplifted the US Dollar (USD) and bond yields. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near 101.70. 10-year US Treasury yields rise to 3.67%. Generally, higher yields on interest-bearing assets weigh on the Silver price, given that they increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. But, in this case, the Silver price remains firm.

Going forward, investors will focus on the US Producer Price Index (PPI) data for August, which will be published at 12:30 GMT. The core PPI is estimated to have accelerated further. At the same time, investors will also focus on the US Initial Jobless Claims data for the week ending September 6.

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

Silver technical analysis

Silver price trades in a limited range of $27.70-$28.20 from more than a week. The upside in the white metal remains restricted by the 200-period Exponential Moving Average (EMA), which trades around $28.80.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, exhibiting a sideways trend.

Silver four-hour chart