Silver price at high-volatility inflection point as inflation risk surges
Silver price edged lower on Wednesday as inflation risk strengthens the US dollar. The released US CPI data showed that inflation remained above the policymakers’ target at 2.4%. With the ongoing geopolitical tensions adding another layer to the inflation concerns, there are increasing bets that the Fed will pause on additional interest rate cuts. Silver and other precious metals tend to thrive in an environment of lower interest rates and a weaker US dollar.
Inflation risk curbs silver price upside
On Wednesday, silver price erased gains from the previous session as high volatility shaped the financial markets. Notably, a stronger US dollar is one of the main factors that have curbed its upside. While crude oil prices have eased from the surprise surge at the start of the week, concerns over prolonged shipping disruptions along the Strait of Hormuz have heightened the inflation risk.
On Wednesday, three cargo vessels were hit by “unknown projectiles” in the all-important oil transportation corridor. Besides, Iran made retaliatory attacks across the Gulf region, including a key oilfield in Saudi Arabia and near the Dubai International Airport. At the same time, the US administration has stated that it has “eliminated” 16 of Iran’s mine-laying vessels near the Strait of Hormuz.
In reaction to the latest events of the US-Iran war, the greenback extended gains from the previous session to trade at $99.22 as at the time of writing. A look at its daily chart signals additional gains in the immediate term, which may further curb silver price gains. The dollar index formed the bullish golden cross pattern with the short-term 25-day EMA crossing the medium-term 50-day MA to the upside.
In addition to the US-Iran war, the US dollar and precious metals markets are reacting to the US inflation data. The CPI figures released on Wednesday showed that inflation remained steady prior to the ongoing war. While it was unchanged from January’s 2.4%, it remained slightly above the Fed’s target.
After the unorthodox tariffs, the US-Iran war has added a new layer of complications. In addition to the upcoming US pce data, investors will continue eyeing the geopolitical tensions in the Middle East and how the extent of the shipping disruptions. Heightened inflation risk is set to bolster the US dollar while weighing on silver price and other precious metals.
Silver price technical analysis
Silver price remains within a rather tight range as investors await further cues on the inflation risk, safe-haven demand, and Fed’s policy outlook. On Wednesday, the white metal edged lower after lacking enough momentum to retest the resistance reached a week ago.
At the time of writing, it was hovering along the short-term 25-day MA while its RSI remains neutral at 50. Based on both the technicals and fundamentals, the precious metal is at a high-volatility inflection point. This means that it can lean on either side depending on the prevailing factors and market sentiment. However, the bulls are still in control as the asset holds steady above the support level of $78.
In the immediate term, the range between the 50-day EMA at $82.16 and the resistance at $90.69 is worth watching. A surge past that range will give the bulls a chance to retest the one-month high hit at the onset of the US-Iran war at $96.70.
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