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How Is Silver Shaping Up Ahead of CPI Data Release?

May 11, 2022

Silver price has paused on its three-week downtrend ahead of the US inflation data. The gains recorded in Tuesday’s session are founded on the easing of the US dollar’s rally. Global growth concerns are also weighing on the metal.

In the past release, the Labor Department indicated that consumer prices had surged by the highest level since 1981 at 8.5% YoY. Some analysts are of the opinion that the price pressures have peaked, even as inflation remains heightened. Subsequently, experts’ forecast for April’s CPI is 8.1%.

As a precious metal, silver is a conventional hedge against inflation. Besides, it is a safe haven during times of economic and political uncertainties. Indeed, these aspects have been the commodity’s bullish drivers in recent months; boosting it to a nine-month high of $26.95 in early March.

However, prospects of higher interest rates have seen outweighed its safe-haven appeal. In the US CPI data scheduled for release on Wednesday, a decline in consumer prices will ease the US dollar rallying. Subsequently, it will make the precious metal less expensive for the buyers holding other currencies.

Even with the probable bounce back, silver price will likely remain under pressure amid a strong labor market and heightened inflationary pressures. Besides, the Chinese exports data released on Monday added to the ongoing global growth concerns. Electronics exports are one of the sectors that have recorded a significant decline. Seeing that silver is also used in manufacturing and electrical, demand concerns will likely continue to curb its upward potential.  

Silver price has eased on its decline, even as it remains on a downtrend. It has been in the red for 14 out of the past 16 trading sessions. After hitting an intraday low of 21.70 on Monday, it is now hovering around the psychological level of 22.00. As at 08:25 a.m GMT, it was at 21.94.

On a daily chart, it is trading below the 25 and 50-day exponential moving averages. Even with the rebound, it remains in the oversold territory with an RSI of 27. Based on these technical indicators, coupled with the fundamentals, I expect silver price to remain under pressure in the short term.

In particular, I expect the precious metal to continue hovering around 22.00 as investors await further cues from the US CPI data. As such, the range between 21.65 and 22.15 will be worth looking out for. A further decline will give the bears an opportunity to hit a fresh year-to-date low  at 21.43. On the flip side, a lower-than-expected CPI reading may yield a rebound to 22.83 as the US dollar eases.

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