Silver retreats ahead of US PCE data, but underlying support persists

Silver prices dip before US PCE data release, but backing remains

Silver (XAG/USD) dips on Tuesday, falling to $67.50, marking a 1.43% decline for the day. The precious metal corrects for a second straight day as investors remain cautious ahead of the United States' Personal Consumption Expenditures (PCE) Price Index release on Wednesday and the ongoing Jackson Hole Symposium. The Federal Reserve's preferred inflation gauge, core PCE, is forecasted to remain stable at 3.4% year-over-year for July.

A stronger-than-expected figure could signal tighter monetary policy, adversely impacting Silver, whereas lower inflation may bolster expectations of a rate hold and bolster precious metals. Market participants are also scrutinizing signs from the U.S. labor market, with the four-week average of ADP employment rise to 11.75K jobs per week in early August, up from 9.5K in the previous period.

This uptick indicates some recovery in private-sector hiring, but it fails to completely alleviate concerns about the U.S. economy's trajectory.

Despite Silver's pullback, US fiscal risks may dampen bearish pressure. The Treasury plans to double its buyback operations for longer-dated bonds, potentially affecting market liquidity and bond yields. Moreover, Treasury Secretary Scott Bessent may utilize up to $1 trillion from the Treasury General Account (TGA), reigniting the narrative of USD debasement amid elevated public debt levels.

Geopolitical tensions also present a potential support factor for precious metals, with Commerzbank highlighting the expansion of US sanctions against Iran, encompassing oil, shipping, technology, gold, and digital assets. This heightened geopolitical uncertainty could fuel safe-haven demand for Silver, helping to curb its losses.

Silver's industrial fundamentals continue to lend support to the metal. Demand is bolstered by the green-energy transition, specifically in photovoltaic solar panel production and electric vehicles, as well as the rapid expansion of artificial intelligence data centers. This convergence of industrial demand and safe-haven appeal is likely to sustain Silver's upward momentum despite Tuesday's pullback.

In the one-hour chart, XAG/USD trades at $67.92, maintaining a restricted near-term outlook as the price remains beneath the 100-hour Simple Moving Average (SMA) of approximately $68.01 while staying above the 200-hour SMA of around $66.40. This configuration, characterized by short-term resistance and long-term support, implies an ongoing consolidation within a broader uptrend.

The Relative Strength Index (RSI) stands at 44.00, suggesting subdued bullish momentum and leaving the metal susceptible to further correction if support weakens. On the upside, initial resistance is positioned at the 100-hour SMA near $68.01, followed by a horizontal barrier at $68.50 and a more distant ceiling around $70.00. On the downside, immediate support is located at $67.50, with additional cushioning at $66.50 and the 200-hour SMA, which is situated close to $66.40. A breach of this level would likely shift the bias more decisively in favor of sellers.