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The US labor market shows resilience as silver prices plummet to $23. In the second quarter, unit labor costs in the US surged to 2.2%, surpassing expectations and the previous value of 1.6%. Silver prices experienced a sharp correction towards the 200-day moving average, which is located around $23.30.
Due to better-than-expected US labor market indicators, silver prices underwent a significant correction to around $23.00. The US Department of Labor reported that initial jobless claims dropped to 216,000 for the week ending September 1, below expectations of 234,000 and the previous value of 229,000, putting pressure on silver for selling.
Additionally, unit labor costs in the second quarter rose to 2.2%, exceeding both expectations and the previous value of 1.6%. Strong wage growth will sustain household disposable income growth and could ultimately keep inflation pressures persistent.
The S&P 500 index opened unfavorably as labor market tightening in the US opens the door for the Fed to further tighten its policies. The market widely expects the Fed to maintain interest rates in September's monetary policy. According to the CME FedWatch tool, traders see a 93% probability of rates remaining unchanged at 5.25%-5.50% during the September policy meeting.
The US Dollar Index slightly retreated from its five-month high of 105.10. However, the upward trend remains intact due to cautious market sentiment. Investors will focus on next week's release of the August Consumer Price Index (CPI) to guide further actions.
Technical Analysis
Silver prices underwent a sharp correction towards the 200-day EMA , currently trading around $23.30. Silver formed a "head and shoulders" chart pattern, indicating a bearish reversal. The neckline of this pattern is located at the June 22 low of $22.18. The RSI (14) dropped to around 40.00. If it breaks below this level, bearish momentum will be activated.
(FX Street Silver Daily Chart)
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