Silver Price Analysis: XAG/USD rises to highs not seen since May after soft PPI figures from the US

• The XAG/USD records more than 2% gains on the day, jumping to the $24.70 area.
• Following soft CPI figures on Wednesday, weak PPI on Thursday applied further pressure on the US Dollar.
• Falling US Treasury yields and dovish bets on the Fed allowed precious metals to advance.

The XAG/USD recorded a fifth consecutive day of gains and jumped to its highest level since mid-May towards the $24.70 area. In that sense, following soft Consumer Price Index (CPI) and Produce Price Index (PPI) data from the US, investors refrained from betting on an additional hike from the Federal Reserve (Fed) past July which made the US yields decline across the board.

The Producer Price Index (PPI) came in at 0.1% MoM, which waslower than the 0.2% expected, while the Core Figure came in at 2.4% YoY, failing to match the expectations of 2.6%. In addition, US Jobless Claims for the week ending on July 7 decelerated. The number of people filing first-time claims for state unemployment insurance came in at 237K, lower than the consensus of 250K and its previous figure of 249K.

The US Treasury yields, which could be seen as the opportunity cost of holding non-yielding metals, continue to decrease following Wednesday’s soft CPI figures. The 2-year yield fell to 4.86%, the 5-year rate to 4%, and the 10-year yield to 3.80%. The 2-year and 5-year rates are displaying a 6% decline on the week, and the 10-year nearly a 3% fall, allowing the XAG/USD to advance. 

According to the CME FedWatch tool, investors continue to bet on a 25 basis point hike by the Federal Reserve (Fed) in July.  The falling yields reflect the decline in the odds of an additional hike following July which stand near 15% vs 40% at the start of the week.

XAG/USD Levels to watch

The daily chart suggests a (very) bullish outlook for the grey metal for the short term. The price trades above its main Simple Moving Averages (SMAs) of 20, 100 and 200 days while technical indicators hint at a strong bullish momentum. In that sense, the Relative Strength Index (RSI) points north near overbought conditions while the Moving Average Convergence Divergence (MACD) prints rising green bars.

Resistance Levels: $25.00, $25.30, $25.60.
Support Levels: $24.05, $23.50 (100-day SMA), $23.10 (20-day SMA),.