Silver price held steady above the critical zone of $20.00 per ounce on Tuesday as the US dollar edged lower. The market is also digesting the recent Chinese trade surplus numbers. The metal’s price movements are founded on its dual status as a precious and industrial metal.
Fundamentals
The US inflation data, which is set for release on Wednesday, has been one the key drivers of the precious metals market since the beginning of the week. In its July meeting, the Federal Reserve approved the second super-sized interest rate hike of 75 basis points in a row.
Since then, the US dollar has been on a decline amid expectations that the US central bank will ease on its policy tightening in coming months. As is the case with other dollar-priced assets, silver price tends to move inversely to the value of the greenback.
Granted, the strong US jobs report released on Friday heightened expectations that the Fed may continue with its aggressive rate hikes during its September meeting. Seeing that bets of a 75 basis points rate increase are not yet locked in, investors are looking for further cues from the US CPI figures. Lower-than-expected numbers will likely sustain silver price above the critical support zone of 20.00.
Silver price prediction
As shown on a daily chart, silver price was trading above the 25 and 50-day exponential moving averages in Tuesday’s session after starting the week on a positive note. On Monday, it rebounded above the psychologically critical level of 20.00 to trade at 20.56 as at the time of writing.
Based on these technical indicators, coupled with the fundamentals, I expect the precious metal to record further gains. However, it will likely continue to experience resistance at 21.00.
With the US CPI data being on the horizon, the range between 20.34, which is along the 50-day EMA, and the resistance level at 20.80 will be worth watching. As a reaction to the US inflation data, the bulls will be seeking to break the resistance around 21.00.
On the flip side, higher-than-expected figures may have the bears retesting the support level at 20.00. If that happens, the 25-day EMA at 19.85 will be the invalidation point for this cautiously bullish thesis.
