Silver erases post-CPI slump, rebounds from three-week low

Silver (XAG/USD) showed significant rebound on Friday, reaching $64.30 at the time of writing, marking a 1.13% increase for the day. The precious metal rose after the US Bureau of Labor Statistics (BLS) reported a modest 3.4% year-over-year increase in the Consumer Price Index (CPI) for August, unchanged from the previous month and in line with expectations.

However, headline inflation rose by 0.4%, compared to the 0.1% increase in July. Core inflation, excluding volatile food and energy prices, grew 0.3% month-over-month, surpassing the 0.2% increase anticipated by economists. Despite the stronger-than-expected core reading, which initially caused the US Dollar (USD) to strengthen and put pressure on silver, the metal swiftly recovered.

The US Dollar faltered in maintaining its gains post-CPI, as headline inflation remained stable and core inflation continued to ease. Attention now shifts to preliminary consumer sentiment data from the University of Michigan, with the Consumer Sentiment Index at 47.8 in September, down from 51.7 previously, and the Current Conditions Index at 50.9 from 51.9.

Inflation expectations are crucial for the interest-rate outlook, with one-year inflation expectations rising to 4.6% from 4%, and the five-year measure at 3.4% from 3.3%. If inflation expectations persist, the Fed's rate-tightening path could remain a source of volatility for silver and the US Dollar. As of the one-hour chart, XAG/USD is trading at $64.53, under pressure while holding below the 100-hour and 200-hour simple moving averages, leading to a bearish near-term bias despite the recent bounce.

The Relative Strength Index (14) has recovered towards the 50 area, suggesting fading downside momentum, but price action remains capped by a resistance band above the market. Initial resistance is observed at the horizontal barrier around $65.28, followed by the 200-hour SMA at $65.74 and the 100-hour SMA at $65.82. On the downside, support lies at the prior horizontal floor near $62.94, where buyers may react if selling resumes.

(Technical analysis, assisted by an AI tool.) Ghiles Guezout, a Market Analyst with experience in stock market investments, trading, and cryptocurrencies, combines fundamental and technical analysis to identify market opportunities. AUD/USD steadies near mid-0.7100s in the Asian session on Friday, halting the previous day's sharp decline to an over one-week low.

August PPI data reinforced expectations of Fed rate hikes, pushing the US Dollar higher and weighing on the Australian Dollar. However, hawkish expectations from the Reserve Bank of Australia limited losses for the AUD as the US Dollar rallies ahead of US consumer inflation data.