On June 9th, the price of silver continued to rise for the third consecutive trading day, building on its recent breakthrough of the multi-year resistance levels at $34.87 and $35.40. As these levels now provide support, silver is outperforming gold and attracting bullish capital inflows. Traders are targeting the psychological levels of $37.00 and $38.00 in the near term.
Focus on the Federal Reserve and CPI Data
While gold is fluctuating around the key technical support level of $3,310.48, silver is benefiting from the same economic drivers and is moving more strongly in price. The market is awaiting the release of the US consumer price index (CPI) on Wednesday to gauge the inflation trend and its impact on the Federal Reserve’s interest rate path. The Federal Reserve is currently in a quiet period before its meeting, but the market has lowered its expectations for interest rate cuts this year from two to one, with the timing potentially in October.
Before the release of the CPI data, the yield of US Treasury bonds slightly declined. The yield of the 10-year Treasury bond was 4.504%, and the yield of the 2-year Treasury bond was 4.02%. A decline in yields typically supports precious metals by reducing the opportunity cost of holding non-interest-bearing assets such as silver and gold.
China-US Trade Negotiations Boost Risk Sentiment
Market optimism about a potential trade deal between China and the United States has intensified bullish expectations for silver. Senior US officials are meeting with Chinese officials in London. Although no breakthrough is expected, the negotiations have set a moderate tone of risk appetite. If an agreement is reached, the industrial demand for silver may rise, especially in industries such as electronics and solar energy that use silver as a key component. Traders have begun to position for the anticipated increase in demand.
Weakening US Dollar Provides Support
The US dollar index dropped 0.3% to 98.92, providing additional support for silver. The weakening of the US dollar makes dollar-denominated assets more attractive to overseas buyers. As gold struggles to maintain its gains below the resistance level of $3,403.63, silver has become the preferred precious metal in the current market environment.
Silver Outlook: Bullish Momentum May Extend to $38.00
Strong technical analysis, favorable economic signals, and a favorable gold-silver ratio all support silver. The 50-day and 200-day moving averages are respectively far below $32.90 and $31.73. Therefore, silver has sufficient upside potential and will not face significant resistance in the short term.
Unless the CPI data rises unexpectedly, the rally in silver indicates that it is expected to touch the range of $37.00 – $38.00 this week.
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