Silver price forecast: U.S. PPI data triggers 5% drop from 5-week high
Silvers rally was short-lived
Silver's recent price action has been marked by sharp volatility, as the precious metal has given back most of its gains but now trades near key support levels.
After reaching a five-week high of $32.30 on Thursday, silver has plummeted by 5%, driven primarily by stronger-than-expected US Producer Price Index (PPI) data. This movement has left investors questioning the metal’s short-term prospects. With significant developments surrounding both the US economy and China's policy shifts, silver’s near-term outlook remains highly uncertain.
Silver price dynamics (September-December 2024). Source: TradingView
Silver's rally earlier this week was short-lived, as it reversed sharply following the release of the US PPI for November, which showed a notable acceleration in inflation. Headline producer inflation rose to 3%, while core inflation increased to 3.4%. While the data had little immediate impact on Federal Reserve interest rate projections, it did spur a rebound in the US Dollar Index (DXY), which rose to 106.80. This put additional pressure on silver, as the dollar's strength typically dampens demand for the metal.
Silver price prediction: Volatility continues as silver faces 200 EMA
On the technical front, silver is facing critical support near its 200-day exponential moving average (EMA) at $30.70, a level that has cushioned declines in today’s European session. Despite the recent drop, the 200-day EMA remains a key point for investors to watch, as a break below this level could signal further downside. The Relative Strength Index (RSI) is far below 50, reflecting bearish momentum, but it is not yet in oversold territory, leaving room for further weakness.
Looking ahead, the market remains focused on developments from China’s two-day economic work conference, where policymakers outlined plans to boost infrastructure investment through special treasury bond issuances and local government funding. Although details on the size of the stimulus package were scarce, the potential for increased demand for silver used in industries like solar panels and mining remains an important factor.
Silver prices hit a three-day high, coming within reach of the November peak of $32.30. Fed dovish outlook and rising industrial demand may pave the way for silver to build on its recent gains.
