Silver Price Forecast: XAG/USD wobbles around $65.40, easing hawkish Fed bets strengthen outlook

During the Asian trading day on Thursday, silver (XAG/USD) hovered around $65.40, fluctuating between a narrow range of prices. The lack of a clear trend led investors to wonder about silver's future, but a potential decline in US inflationary pressures in July had a positive impact on the precious metal's outlook. On Wednesday, the US Bureau of Labor Statistics released data showing a slowdown in headline Consumer Price Index (CPI) growth to 3.4% Year-on-Year (YoY) from 3.5% in June.

The core CPI, which excludes volatile food and energy items, showed a similar decline to 2.5% YoY, as anticipated. The easing of price pressures has led to reduced concerns about a near-term Federal Reserve (Fed) interest rate hike. According to the CME FedWatch tool, the likelihood of the Fed maintaining interest rates steady in the September meeting has risen to approximately 60% from 30.4% a month ago.

This situation bodes well for non-yielding assets, such as silver. Moving forward, market participants will be closely monitoring the US Producer Price Index (PPI) data for July, which will be released at 12:30 GMT. Currently, XAG/USD is trading flat around $65.40, surpassing the 20-day exponential moving average (EMA) of $61.66 and maintaining a near-term bullish bias.

This upward movement above the short-term EMA suggests that demand for silver remains strong. The Relative Strength Index (14) stands at 61.17, indicating positive momentum without signaling overbought conditions, further supporting the bullish outlook. On the downside, the 20-day EMA at $61.66 serves as the main support level. If silver breaks this level, a deeper corrective phase could follow.

Looking ahead, a break above the current consolidation above the $66.59 level could propel silver prices towards the June 16 high of $71.19. Silver, a precious metal extensively traded by investors, has historically been utilized as a store of value and a medium of exchange. While it may not be as popular as gold, silver can provide diversification benefits to investment portfolios due to its intrinsic value or as a hedge during periods of high inflation.

Investors have various options for acquiring silver, including purchasing physical silver in coins or bars or trading it through Exchange Traded Funds that track its price on international markets. Numerous factors can influence silver prices, including geopolitical instability, fears of an economic downturn, the US Dollar's performance, investment demand, mining supply, and recycling rates.

Silver's industrial applications, particularly in sectors like electronics and solar energy, can also impact its price. As a yieldless asset, silver tends to rise when interest rates are low and falls when rates increase. Moreover, silver prices often follow the movements of gold, given their similar status as safe-haven assets.

The Gold/Silver ratio provides insight into the relative valuation of these two metals, with a high ratio potentially suggesting that silver is undervalued compared to gold. Investors closely watch the US, Chinese, and Indian economies, as their industrial sectors and consumer demand for silver can significantly impact prices.