Silver Price Forecast: XAG/USD drops below $19.50 as traders brace for next week’s FOMC decision

• Silver prices tumble at the 100-day Exponential Moving Average (EMA), prolonging its losses to the 50-day EMA at $19.08.
• The US Core PCE expanded by 5.1% YoY, above estimates, paving the path for further tightening.
• Investors focus on November’s Fed monetary policy meeting, with expectations of the US central bank hiking 75 bps.

Silver price stumbles at a key resistance level as the New York session progresses due to US economic data justifying further Federal Reserve’s actions, while a risk-on impulse keeps safe-haven assets pressured, but the US Dollar, which bucked the trend, as the next week’s Federal Reserve monetary policy decision lurks. The XAG/USD is trading at $19.17 a troy ounce, down by 2%, after hitting a daily high at $19.63.

US core PCE justifies further Fed’s aggression

Wall Street extends its gains even though the greenback edges higher. A measurement of inflation revealed by the Commerce Department, which is also the Fed’s favorite inflation gauge, increased 0.5% MoM, above the previous month’s reading, justifying the need for additional rate hikes amidst a Fed pivot narrative circulating in the financial markets. Also, the year-over-year number jumped by 5.1%, exceeding forecasts of 4.9%

In a separate report, the Employment Cost Index (ECI), an indicator used by the Fed in addressing inflation on wages, increased by 1.2% in the July-September period, as reported by the Department of Labor.

Aside from inflation data, the University of Michigan Consumer Sentiment, on its October final reading, remained unchanged at 59.9, while inflation expectations barely moved. According to the survey, one-year horizon inflation is estimated at 5% from 5.1%, while for 5-years is estimated at 2.9%.

Of late, the Dallas Fed Trimmed Mean PCE for September edged lower from 6% to 4.3%. At the same time, the Atlanta Fed GDPNow Forecast for Q4 is 3.1%.

Silver is on the defensive as US Treasury yields jumped, underpinning the US Dollar

The market’s reaction to the US data was felt in the fixed-income markets, as treasuries sold off, which was positive news for bond yields. The US 10-year Treasury bond yield is gaining nine bps, up at 4.01%, a headwind for the precious metals segment.

In the meantime, the US Dollar Index, a gauge of the buck’s value vs. a basket of its rivals, advances 0.30% at 110.895, underpinned by

Now market participants turn to the next week’s Federal Reserve Open Market Committee (FOMC), in which most analysts expect the Fed to hike rates by 75 bps, as reported by the CME FedWatch Tool, with odds at an 84.5% chance. However, December’s meeting is split between 50 or 75 bps, with the majority of the investors

Silver Key Technical Levels