Silver Rallies On Soft US CPI Data And Falling Yields

(November 14, 2023 - Patricio Martín)

• The XAG/USD ascended to $23.00, seeing more than 3% gains.
• Headline and Core CPI from the US came in lower than expected in October, fuelling dovish bets on the Fed.
• The US bond yields dived, allowing the metal to gather momentum.

The XAG/USD rallied sharply on Tuesday to above $23.00, up by 3%, with soft CPI data from the US and falling US yields contributing to the upward movements.

The US Bureau of Labor Statistics (BLS) experienced a decrease in inflation to 3.2% (YoY) in October, while the Core CPI, which excludes the volatile prices of food and energy, recorded a 4% increase below the expected 4.1% rise. On a monthly basis, the headline CPI remained stable, while the Core CPI saw a growth of 0.2%.

As a reaction, the US government bond yields, often seen as the opportunity cost of holding non-yielding metals, sharply declined. The 2-year rate fell to 4.84%, and the 5 and 10-year yields are seen at 4.45%, with all three seen more than 2% declines. In that sense, they may suggest that markets are taking a rate hike by the Federal Reserve (Fed) off the table in December. Now, the focus shifts to the next set of data for markets on how long the bank will hold rates at restrictive levels.

On Wednesday, the US will release the Producer Price Index (PPI) and Retail Sales from October, which will likely have an impact on those expectations.

XAG/USD levels to watch

Analysing the daily chart, the XAG/USD displays a neutral to bullish technical outlook as bulls have gained significant momentum. The Relative Strength Index (RSI) displays a bullish bias with an ascending slope above its middle point, while the Moving Average Convergence (MACD) histogram exhibits increasing green bars. Considering the broader technical landscape, the pair is above the 20-day Simple Moving Average (SMA) but below the 100 and 200-day SMAs, indicating that the bears are still holding some dominance over the bears on the broader time horizon. However, the outlook will remain positive for the short term while the bulls gather further ground and hold above the 20-day SMA.

Supports: $22.86 (20-day SMA),$22.50, $22.30
Resistances: $ 23.15 -25 (100 and 200-day SMA convergence), $23.50, $23.70.