Silver Price Forecast: XAG/USD consolidates beneath the 100-DMA at $23.15 ahead of the US CPI report

• On Wednesday, XAG/USD failed to capitalize on broad US dollar weakness across the board.
• US inflation report looms as financial assets begin to trade in narrow ranges.
• XAG/USD Technical Outlook: Neutral-upward biased that would need the confirmation of a daily close above the 100-DMA.

Silver (XAG/USD) faces strong resistance around the 100-DMA at $23.20, snapping three days of gains, barely dropping 0.04% in the New York session. At the time of writing is trading at $23.15. The market mood in the financial markets, ahead of Thursday’s US inflation report, is optimistic.

Meanwhile, US Treasury yields slid some after reaching new YTD highs led by the US 10-year T-note, down three basis points, sitting at 1.94%. At the same time, US 10-year TIPS yield, a proxy for real yields, which correlate4 inversely with precious metal prices, dips to -0.495%. It is worth noting that despite the fall in nominal and real yields, XAG/USD has been unable to capitalize, probably due to profit-taking, ahead of a volatile Thursday.

A light US economic docket would only feature Fed speakers throughout the day. Federal Reserve Governor Michell Bowman and Cleveland’s Fed President Loretta Mester would cross the wires at 15:30 GMT and 17:00 GMT, respectively. Both policymakers could shed light ahead of January’s Consumer Price Index (CPI) release.

Analysts at TD securities expect inflation to “slow significantly in 2022, and fiscal stimulus fades and supply constraints ease, but for now, the data remain strong.” TD analysts’ estimates for January’s inflation are headline CPI at 7.2%, while core CPI at 5.8%.

Furthermore, noted that “For headline CPI, we forecast 2.9% y/y in 22Q4, down from 6.7% y/y in 21Q4. For core CPI, we forecast 3.0% y/y in 22Q4, down from 5.0% y/y in 21Q4. For the core PCE index, we forecast 2.5% y/y in 22Q4, down from 4.6% y/y in 21Q4.”

XAG/USD Price Forecast: Technical outlook

Silver is neutral-upward biased, but failure at the 100-DMA at $23.20 could exert downward pressure on the non-yielding metal. 

That said, XAG/USD’s first support would be $23.00. Breach of the latter exposes the 50-DMA at $22.82, followed by a two-month-old upslope trendline that passes around the $22.65-75 area, which once broken, can challenge January 28 swing low at $22.15.