Silver Price Forecast: XAG/USD rebounds from $31.60 as persistent US CPI boosts Fed rate cut bets

• Silver price recovers from $31.60 following the release of US CPI data, which showed that price pressures remained persistent in November.
• An expected rise in the US CPI has boosted dovish bets on the Fed for next week’s monetary policy meeting.
• Investors await China’s annual two-day economic work conference for clues about the economy’s growth prospects.

Silver price (XAG/USD) finds buying interest near the intraday low of $31.60 in the North American session on Wednesday following the release of US Consumer Price Index (CPI) data. .) for November. The US CPI report showed that price pressures grew in line with estimates, encouraging traders to accelerate dovish bets on the Federal Reserve (Fed) for the monetary policy meeting on 18 December.

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, grew in line with estimates and the previous release of 3.3%. The general CPI and the monthly core rose as expected by 0.3%.

The probability that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50% has increased to more than 96% from 89% on Tuesday following the release of inflation data from USA A favorable scenario for non-yielding assets, such as silver, as it will reduce their opportunity costs.

The US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, shows sharp movements following the release of the data. US 10-year Treasury yields fall near 4.21%.

Going forward, investors will focus on the outcome of China’s annual two-day closed-door economic work conference, a meeting at which the Politburo will discuss a possible stimulus package to revive domestic consumption and stabilize the real estate sector. .

Silver, as a metal, has applications in several industries, and further economic stimulus will increase its demand.

Silver technical analysis

The price of silver consolidates around $31.50. The white metal shot up early in the week to near $32.30 after breaking above three-day resistance at $31.30. The asset rises above the 20-day EMA near $31.20, suggesting that the short-term trend has turned bullish.

The 14-day Relative Strength Index (RSI) is approaching 60.00. A bullish momentum would trigger a decisive break above it.

Looking down, the ascending trend line around $29.50, which is drawn from the February 29 low of $22.30 on a daily time frame, would act as key support for silver price. To the upside, horizontal resistance drawn from the May 21 high of $32.50 would be the barrier.

Silver daily chart