Silver remains steady near the $38.00 mark, buoyed by softer-than-expected US Producer Price Index (PPI) data for June. Trading around $37.90 per ounce, Silver showed little reaction to the flat PPI, which underperformed forecasts, contrasting with a previous monthly rise.
The data revealed headline PPI unchanged month-on-month, while annual PPI slowed to 2.3%, both below forecasts. Core PPI also showed no monthly growth, missing expectations and decreasing on a yearly basis to 2.6%.
This followed US Consumer Price Index (CPI) data, where core inflation was slightly weaker. Consequently, urgency for rate cuts has been reduced, easing pressure on the US Dollar and supporting Silver prices.
Silver reached a 14-year high of $39.13 recently before a slight retreat, yet continues to follow a bullish trend. The metal is supported near the midline of a rising channel, having broken out from a prior consolidation range.
The 21-day EMA at $36.82 offers key support, with immediate resistance at $39.13. A close above this could push Silver toward $40.00, while $37.50 acts as initial support.
Momentum, supported by RSI and MACD indicators, suggests continued strength in Silver’s upward trajectory, despite recent profit-taking.
We believe the recent inflation reports signal a favorable environment for silver in the coming weeks. The subdued price pressures increase the likelihood of Federal Reserve rate cuts later this year. This should keep the US Dollar suppressed and support further gains in precious metals.
Current market pricing reflects this sentiment, with the CME FedWatch Tool indicating over a 90% probability of a rate cut by the September meeting. Furthermore, the latest Commitments of Traders report shows money managers holding significant net-long positions, confirming strong speculative interest in the metal’s continued ascent.
Given the bullish momentum indicators, we see value in using call options to capitalize on potential upward moves while defining risk. This strategy allows traders to participate in a rally toward the $40.00 mark without the full capital exposure of holding futures contracts. For those wanting to temper costs, constructing bull call spreads could be an effective approach.
The recent multi-year high is significant, drawing comparisons to the powerful rally in 2011 that saw prices approach $50 per ounce. While past performance is not a guarantee of future results, this historical precedent provides a psychological roadmap for a potential extended bull run.
Traders should closely watch the immediate resistance level highlighted in the analysis. A sustained break and close above that point would be our signal to add to bullish positions, while a drop below the key moving average support would warrant a defensive re-evaluation of the trade.
