Silver erases post-CPI slump, rebounds from three-week low

• Silver rebounds sharply from a three-week low and gains 1.13% on Friday.
• US headline inflation remains stable at 3.4% in August, in line with market expectations.
• A stronger monthly core inflation reading initially pressured the precious metal, but the US Dollar quickly gave back its post-data gains.

Silver (XAG/USD) rebounds sharply on Friday, trading around $64.30 at the time of writing, up 1.13% on the day. The white metal recovers after briefly falling to a three-week low of $62.94 in the immediate reaction to the latest United States (US) inflation figures.

The US Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose 3.4% YoY in August, unchanged from the previous month and in line with market expectations. On a monthly basis, headline inflation increased 0.4%, accelerating from the 0.1% rise recorded in July.

Underlying inflation delivered a slightly firmer signal. The core CPI, which excludes volatile food and energy prices, rose 0.3% MoM, above the 0.2% increase expected by economists. However, annual core inflation eased to 2.4% from 2.5% in July.

Silver initially came under selling pressure as the stronger-than-expected monthly core reading triggered a rebound in the US Dollar (USD). Higher inflation can strengthen the scope for monetary tightening by the Federal Reserve (Fed), generally creating a headwind for non-yielding precious metals.

However, the initial reaction quickly reversed. The US Dollar struggled to retain its post-CPI gains as annual headline inflation showed no renewed acceleration and core inflation continued to moderate on a yearly basis. The fading USD rebound allowed Silver to recover rapidly from its three-week low and return above $64.50.

Attention also turns to preliminary consumer sentiment data from the University of Michigan (UoM). The Consumer Sentiment Index came in at 47.8 in September, down from 51.7 previously. The Current Conditions Index declined to 50.9 from 51.9, while the Consumer Expectations Index fell to 45.8 from 51.5.

Inflation expectations could prove particularly important for the interest-rate outlook. One-year inflation expectations rose to 4.6% from 4%, while the five-year measure edged higher to 3.4% from 3.3%. Persistently elevated inflation expectations could reinforce the Fed's path toward tightening and remain a source of volatility for Silver and the US Dollar.

XAG/USD technical analysis

In the one-hour chart, XAG/USD trades at $64.53. The metal remains under pressure while it holds below the 100-hour simple moving average (SMA) at $65.82 and the 200-hour SMA at $65.74, keeping the near-term bias bearish despite the latest bounce. The Relative Strength Index (14) has recovered toward the 50 area, hinting that downside momentum has faded, but price action is still capped by a dense resistance band just above the market.

On the topside, initial resistance is seen at the horizontal barrier around $65.28, followed by the 200-hour SMA at $65.74 and then the 100-hour SMA at $65.82. On the downside, the next notable support sits at the prior horizontal floor near $62.94, where buyers would be expected to show interest if selling resumes.

(The technical analysis of this story was written with the help of an AI tool. Know more.)