Silver Price Forecast: XAG/USD rebounds from $31.60 as sticky US CPI boosts Fed rate cut bets

• Silver price recovers from 31.60 after the US CPI data release, which showed that price pressures remained sticky in November.
• An expected growth in the US CPI has boosted Fed dovish bets for the policy meeting next week.
• Investors await China’s two-day annual economic work conference to get cues about economy’s growth prospects.

Silver price (XAG/USD) finds buying interest near the intraday low of $31.60 in Wednesday’s North American session after the release of the United States (US) Consumer Price Index (CPI) data for November. The US CPI report showed that price pressures grew in line with estimates, which encouraged traders to accelerate dovish Federal Reserve (Fed) bets for the policy meeting on December 18.

Annual headline CPI rose by 2.7%, as expected, faster than the October reading of 2.6%. The core CPI – which excludes volatile foods and energy prices – grew in line with estimates and the prior release of 3.3%. Month-on-month headline and core CPI rose expectedly by 0.3%.

The probability for the Fed to reduce interest rates by 25 basis points (bps) to 4.25%-4.50% has increased to more than 96% from 89% on Tuesday after the release of the US inflation data.  A scenario that is favorable for non-yielding assets, such as Silver, as it will reduce their opportunity costs.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, shows whipsaw moves after the data release. 10-year US Treasury yields drop to near 4.21%.

Going forward, investors will focus on the outcome of China’s two-day closed-door annual economic work conference, a meeting in which Politburo will discuss over likely stimulus package to revive domestic consumption and stability the realty sector.

Silver, as a metal, has applications in various industries, and higher economic stimulus will boost its demand.

Silver technical analysis

Silver price consolidates around $31.50. The white metal rallied at the start of the week to near $32.30 after breaking above the three-day resistance of $31.30. The asset climbs above the 20-day Exponential Moving Average (EMA) near $31.20, suggesting that the near-term trend has turned bullish.

The 14-day Relative Strength Index (RSI) approaches 60.00. A bullish momentum would trigger a decisive break above the same.

Looking down, the upward-sloping trendline around $29.50, which is plotted from the February 29 low of $22.30 on a daily timeframe, would act as key support for the Silver price. On the upside, the horizontal resistance plotted from the May 21 high of $32.50 would be the barrier.

Silver daily chart