Silver regains ground above $64 as Fed rate hike bets fade

Silver (XAG/USD) gained 0.37% on Friday, trading around $64.70, as it recouped some losses from its recent decline. The precious metal benefits from easing expectations of increased interest rates in the United States, despite ongoing tension in the Middle East that fuels concerns about energy prices. Recent U.S. inflation data suggest that price pressures are beginning to ease, with the Producer Price Index (PPI) slowing to 4.7% year-over-year and the Core PPI at 4.2%.

These figures, along with the Consumer Price Index (CPI) data released earlier, have reduced expectations of further monetary tightening by the Federal Reserve. The chance of an interest rate hike at the September meeting now stands at around 35%, down from 40% immediately after the PPI release and significantly higher at the end of July.

This shift supports the price of Silver, as lower interest rates decrease the opportunity cost of holding non-yielding assets. However, Fed officials remain divided on the issue, with some arguing for a patient approach, while others believe further rate hikes may be necessary for price stability. The geopolitical situation remains a key factor for Silver prices, with stalled negotiations for traffic through the Strait of Hormuz and limited traffic through the Bab el-Mandeb Strait keeping oil prices elevated.

Attention will now turn to the U.S. July Retail Sales data, due later on Friday. If the retail sales report shows weaker-than-expected consumer spending, it could strengthen the case for a more cautious Federal Reserve and provide further support for Silver. Conversely, robust U.S. consumer spending might reignite speculation that interest rates will remain higher for a longer period.

The current price of Silver is $64.67, trading below the 100-hour simple moving average ($65.00) and the downward resistance trend line near $65.15. While the pair remains above the 200-hour SMA ($63.09), indicating an underlying uptrend, its position between these moving averages suggests near-term consolidation under resistance.

The Relative Strength Index (RSI) at 52 suggests mild positive momentum, but the current price is still restrained by overhead levels, limiting the upside potential. On the upside, immediate resistance is clustered around the 100-hour SMA ($65.00) and the trend-line barrier near $65.15, with a more distant horizontal cap at $66.80 likely to attract sellers on a stronger rebound.

On the downside, initial support is expected near the 200-hour SMA ($63.09) and the horizontal support at $63.00. A break below $63.00 could trigger a deeper correction, weakening the broader bullish outlook for Silver.