Silver Price Analysis: XAG/USD jumps back into $22s, but still in familiar ranges – US CPI in focus

• Silver is higher on Monday in the $22.25 area, having set multi-week highs above $22.50 earlier in the day.
• But silver remains within recent intra-day ranges ahead of US CPI on Friday.

Spot silver (XAG/USD) prices, though trading with healthy on-the-day gains of around 1.5%, have remained largely stuck within recent intra-day ranges. XAG/USD just about managed to print fresh multi-week highs above the $22.50 per troy ounce mark earlier in the day but has since waned back to the $22.25 region, amid a broader lack of catalysts to spur cross-asset price action.

Last Friday’s US labour market report for May seemed not to shift the dial too much for markets, with silver still close to its pre-NFP levels. The data showed a slightly faster than expected pace of job gains in the US last month, but also showed wage pressures easing, as expected, contributing to the idea that price pressures in the US economy might be starting to ease.

The US inflation story (is it easing, how quickly is it easing and how will the Fed respond) remains in focus this week with the release of US Consumer Price Inflation (CPI) data out on Friday. After prices pressures showed signs of pulling back modestly from elevated levels in April, market participants will be looking to see if this trend continued last month.

If so, that takes the pressure off of the Fed to keep tightening monetary policy at a rapid pace. A downside surprise would, for example, make a 50 bps rate hike in September (50 bps hikes in June and July are currently seen as a done deal) much less likely. This could put the buck and long-term US bond yields under yet more pressure, which would give tailwinds for silver.

XAG/USD thus has a reasonably good chance of breaking out into the upper $22.50s and advancing on towards its 50 and 200-Day Moving Averages in the lower/mid-$23.00s later this week/next. However, the next few days are set to be very quiet, with not much by way of notable US data and no Fed speak, given policymakers have entered the so-called “blackout” ahead of next week’s Fed meeting. The ECB decision on Thursday will be worth watching, as the bank becomes incrementally more hawkish.