XAG / USD hits a new three-month high above $ 25.00

• XAG / USD moves higher as US inflation soars to its highest level in 30 years.
• XAG / USD was up $ 0.80 upon the release of the data.
• Real 5-year yields in the United States fall from -1.85% to -1.941%, weighing on the US dollar.

The silver price (XAG / USD) moved sharply higher when the Bureau of Labor Statistics (BLS) revealed that the October CPI Consumer Price Index, an American measure of prices paid by consumers, rose 6.2%, higher than the 5.4% inflation increase in September and the oldest since 1990. That being said, the non-performing metal is up nearly 3% on the day, trading at $ 24.99 at the time of writing.

XAG / USD reacted with a price jump of $ 0.80, from $ 24.20 to $ 25.00, once the data was released. The rebound in prices left behind the September and October highs at $ 24.87 and $ 24.82, respectively, which could now act as support areas in the future.

The US CPI rose 6.2%, the highest reading since 1990

In the United States economic calendar, the Bureau of Labor Statistics revealed that the Consumer Price Index (CPI) rose 6.2% year-on-year, compared to 5.4% in September, leaving behind estimates of 5.3% by economists. What’s more, the core CPI reading, which excludes volatile items such as energy and food, increased 4.6% in the same period.

In the meantime, benchmark yield on US 10-year bonds rose almost seven basis points, recovering some of its weekly losses, standing at 1.517%, which underpins the demand for the USD. The US dollar DXY index, a measure of the dollar’s value against major currencies, is up 0.67% on the day to currently trade at 94.59.

But, Why do silver prices keep rising? The answer is that real returns, the difference in interest rates minus inflation, are going down. The US 5-year TIPS, a measure of real returns, has fallen from -1.85% to -1.941%, the second-lowest reading since July 2021, according to Reuters.

XAG / USD technical perspective

Silver daily chart

The white metal has a short-term upward bias, as attested by shorter time-frame moving averages below the spot price, but the 200-day SMA is at 25.38$, which would be a strong resistance to overcome. Despite the above, the RSI at 67 still has enough room before reaching overbought conditions, indicating that the XAG / USD could extend the rally.

As mentioned in the previous paragraph, the 200-day SMA in 25.38$ it would be the first resistance level after a new upward momentum. A break above that level could open the door for the bulls to attack the trading area. 26.00$, which would then expose the level of 27.00$.