Silver Gains Ground - Investors Eye U.S. Consumer Inflation, Retail Sales

(February 13, 2020 - Kenny Fisher)

Fed Will Use QE, if Needed

Fed Chair Jerome Powell testified before Congress earlier this week and provided some details about the Fed’s monetary strategy. On Tuesday, Powell told the House Financial Services Committee that although the China coronavirus could pose a risk to the global economy, the Fed had no plans to change its current monetary policy.

On Wednesday Powell outlined to the Senate Banking Committee his strategy in case of a financial crisis. Powell said that the Fed had two tools to fight a recession – quantitative easing, which involves large purchases of assets, and forward guidance, which means communicating with the markets about the likely future course of interest rate policy. Powell said that he believes that the Fed would use both these tools “aggressively should the need arise to do so”. Under Powell’s leadership, the Fed cut rates three times last year to snuff out any recessionary trends in the economy, but with rates currently at a range of 1.50-1.75%, there isn’t much more room to keep cutting.

Will U.S. Consumer Data Shake Up Silver?

Later in the week, the U.S. releases key consumer numbers. Consumer inflation and consumer spending have both been soft in recent months, although the U.S. economy remains in good shape. CPI dipped to 0.2% in December, down from 0.3%. Another weak gain of 0.2% is projected for January. It’s a similar story with retail sales, which is expected to repeat with a gain of 0.3%. Any unexpected figure from these key indicators could shake up silver prices.

Silver Technical Analysis

Silver continues to trade in a narrow range between 17.50 and 18.00. With the pair still sandwiched between the 50-day and 200-day EMA lines, silver could continue to grind. On the upside, the 50-day EMA is currently situated at 17.67, just above the pair. The round number of 18.00 continues to show resilience as a resistance line. Above, we find resistance at 18.60. On the downside, 17.50 is under pressure in support. The 200-day EMA is at 17.09, followed closely by support at the round number of 17.00.