The spot silver price is trading close to its lowest level in 2021 as inflation fears give way to taper fears.
Silver (XAGUSD) has turned sharply lower over the last month as markets digest the potential impact of an aggressive FOMC. Recently, Fed Chairman Powell’s increasingly hawkish stance has crushed inflation hedges like Gold and Bitcoin. As a result, the silver price has lost over 12% in the last four weeks. However, if tomorrow’s Core CPI print comes in hot, it could drive the price into the teens for the first time in 18 months.
Friday’s Consumer Price Index data is expected to show an increase of 0.5% (MoM) in November vs 0.6% in October. In simple terms, a print inline or higher than expected will increase the chances of an accelerated taper. In that event, risk assets could come under considerable pressure. On the other hand, Silver may get a reprieve if the inflation gauge shows price pressure is easing.
XAGUSD Price Analysis
The daily chart shows the silver price has been trending lower within the confines of the wide $21.50-$30.00 trading band for ten months. Presently, the price has support around this year’s low of $21.50. However, a high CPI print could push Silver to a new 2021 low.
Below $21.50, an extension towards the descending trend support at $20.50 is probable. In contrast, an exaggerated sell-off could target the October 2020 highs at around $19.50.
In my opinion, whilst the immediate outlook hinges on tomorrow’s numbers, overall, the Silver price lacks a bullish catalyst. Subsequently, unless the data is a huge miss on the downside, XAG should continue to forge a path lower. However, a daily close above the 100-Day Moving Average could encourage short-covering. Therefore, a close above $23.68 will relieve the immediate pressure and invalidate the short-term bearish view.
Silver Price Chart (Daily)
For more market insights, follow Elliott on Twitter.