SILVER Analysis
Afternoon: Silver Declines as US Dollar Strengthens Amid Inflation Concerns and Fed Rate Path Uncertainty
Highlights:
- Dollar Impact: Rising US dollar suppresses demand for silver as a non-yielding asset.
- Fed Commentary: Upcoming statements from Chair Powell and data releases will shape rate path expectations.
- Economic Data: Watch for inflation and retail sales data, as these may impact dollar trends and Fed rate decisions.
Overview:
Silver prices declined as the US dollar strengthened above 106.5, reaching its highest level in a year. This dollar rally follows the latest inflation data release, which showed a modest increase in the US annual inflation rate to 2.6% in October from 2.4% in September, as anticipated. Core inflation held steady at 3.3%, in line with market expectations, supporting the Federal Reserve’s view that inflation may gradually return to its target range as rates are finely adjusted. Fed officials, including Kashkari, Logan, and Musalem, have voiced cautious optimism about managing inflation without over-tightening monetary policy.
The robust dollar has gained further traction from “Trump trades,” where investors anticipate that growth-focused and potentially inflationary policies under a Trump re-election could constrain the Fed’s ability to lower borrowing costs significantly. This perspective drives more market participants towards dollar-denominated assets and reduces the appeal of precious metals like silver, which tend to be pressured by a strong dollar environment.
Investors are closely watching upcoming economic data releases and comments from Fed Chair Jerome Powell, as these may provide more clarity on the Fed’s monetary policy trajectory. Key releases to watch include the US Producer Price Index (PPI), retail sales, and Eurozone economic indicators such as Flash Employment Change and GDP data, all of which may further influence dollar strength and silver pricing.
Support and Resistance Levels:
- Silver spot prices: Support at $29.50; resistance at $30.50.
- Silver MCX prices: Support at 88,000; resistance at 90,300.
Suggested Trading Action: Traders may consider shorting silver on rallies near $30.20, with a target of $29.60 and a stop-loss at $30.50 to manage potential upward moves.
Support and Resistance Levels:
