Silver Price Analysis: XAG/USD juggles around $23.30, remains upbeat on renewed Fed rate cut bets

• Silver price consolidates around $23.60 as trading volume is lower than average due to closed US markets.
• Investors are more confident about Fed reducing interest rates from March after soft US PPI data.
• Deepening Middle East tensions have improved safe-haven appeal.

Silver price (XAG/USD) trades back-and-forth around $23.30 in a thin-volume trading session due to holiday in the US markets on account of Martin Luther King Birthday.

The broader appeal for non-yielding assets is still upbeat as investors seem more convinced about a reduction in interest rates by the Federal Reserve (Fed) from March after the release of the softer-than-projected United States Producer Price Index (PPI) for December. A surprisingly soft US PPI report has eased fears for inflation remaining stubborn ahead.

S&P500 futures have witnessed some losses in the European session, portraying a decline in risk-appetite of the market participants. The US Dollar Index (DXY) has rebounded to near $102.50 as investors expect that optimism about the Fed cutting interest rates earlier than other central banks is reaching maturity. The market participants see the European Central Bank (ECB) and the Bank of England (BoE) also reducing borrowing costs sooner due to vulnerable economic outlook.

This week, market participants will keenly focus on the US monthly Retail Sales data for December. Investors anticipate that the consumer spending grew at a higher pace of 0.4% against 0.3% increase in November.

Meanwhile, the appeal for safe-haven assets has also improved due to deepening Middle East crisis. Iran-backed Houthis rebels have warned about a retaliation for airstrikes by the US and the UK military.

Silver technical analysis

Silver price delivers a sharp recovery after witnessing a selling climax near $22.50. On a 60-minute timeframe, the downside in the Silver price will be supported around January 4 low at $22.69 while the upside will remain capped near December 2023 low at $23.54.

The near-term demand seems positive as the asset is holding above the 50-period Exponential Moving Average (EMA), which trades around $23.10.

Meanwhile, the 14-period Relative Strength Index (RSI) has slipped into the 40.00-60.00 range. This indicates that momentum has faded but upside bias is still intact.

Silver hourly chart