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22 Dec 2023

Silver Price Analysis: XAG/USD rebounds near day’s high as US core PCE decelerates

  • Silver price recovers swiftly after softer-than-projected US core PCE inflation report.
  • Sost underlying inflation data has boosted Fed’s rate cut bets.
  • The US Durable Goods Orders rose strongly by 5.4% vs. consensus of 2.2%.

Silver price (XAG/USD) gathers strength for more upside as the United States Bureau of Economic Analysis (BEA) reported softer-than-anticipated core Personal Consumption Expenditure (PCE) price index report for November.

Monthly US core PCE data grew slightly by 0.1% while investors projected a growth rate of 0.2% as recorded for October. On an annualized basis, the underlying inflation has decelerated to 3.2% vs. the consensus of 3.3% and the former reading of 3.5%. Investors should note that the Federal Reserve (Fed), in its Summary of Projections (SOP) released least week, forecasted core PCE at 3.2% by the year-end.

A soft US core PCE report may deepen expectations for rate cuts from the Fed further, which will keep bullions underpinned against the US Dollar. The US Dollar Index (DXY) is looking to extend its downside below four-month low of 101.50

Contrary to market expectations, Fed policymakers are consistently pushing back rate cut expectations, citing restrictive interest rate policy for a longer period is highly required to ensure the achievement of price stability.

Meanwhile, US Durable Goods Orders for November remained upbeat than expectations. Fresh orders for core goods rose significantly by 5.4% vs. the consensus of 2.2%. In October, the economic data was contracted by 5.1%.

Silver technical analysis

Silver price climbs to near the 61.8% Fibonacci retracement (plotted from December 12 high at $25.90 to December 13 low around $22.60) at $22.60 on a two-hour scale. The 20-period Exponential Moving Average (EMA) around $24.35 continues to provide support to the white metal.

The Relative Strength Index (RSI) (14) oscillates in the bullish range of 60.00-80.00, which indicates that the upside momentum is intact.

Silver two-hour chart

 

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