- The silver price is recovering from 31.60 after the publication of CPI data in the US, which showed that the price pressure in November remained unchanged.
- The expected rise in the US CPI strengthened the Fed’s dovish stance for next week’s policy meeting.
- Investors are waiting for China’s two-day annual economic conference for clues on the economy’s growth prospects.
The price of silver (XAG/USD) traded near an intraday low of $31.60 during Wednesday’s North American session following the release of US Consumer Price Index (CPI) data for November. The U.S. CPI report showed price pressure increased in line with estimates, encouraging traders to accelerate the Federal Reserve’s (Fed) dovish guidance ahead of its December 18 policy meeting.
The annual headline CPI rose 2.7% as expected, faster than October’s reading of 2.6%. Core CPI – which excludes volatile food and energy prices – rose 3.3% in line with estimates and earlier publication. Month on month, nominal and core CPI increased by the expected 0.3%.
The probability that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50% increased to over 96% from 89% on Tuesday after the release of US inflation data. A favorable scenario for unprofitable assets such as silver as it will lower their opportunity costs.
The US Dollar Index (DXY), which tracks the dollar’s value against six major currencies, has been showing fluctuations following the data release. The yield on 10-year US treasury bonds fell to nearly 4.21%.
Going forward, investors will focus on the results of China’s two-day annual economic conference behind closed doors, a meeting where the Politburo will discuss a likely stimulus package aimed at reviving domestic consumption and stability of the real estate sector.
Silver, as a metal, is used in various industries, and a stronger economic stimulus will escalate its demand.
Silver technical analysis
The silver price is consolidating around $31.50. The white metal rose to nearly $32.30 at the start of the week after breaking through three-day resistance at $31.30. The asset is rising above the 20-day exponential moving average (EMA) near $31.20, suggesting that the short-term trend has turned bullish.
The 14-day relative strength index (RSI) is near 60.00. Bullish momentum would result in a decisive break above the same.
Looking down, the rising trend line around $29.50, drawn from the February 29 low of $22.30 on the daily time frame, will provide key support for the silver price. On the other hand, the barrier will be horizontal resistance drawn from the May 21 high of $32.50.
