Silver (XAG/USD) Holds $79.9 as NFP Miss Sets Up CPI Test for $82 Next Week
Silver closed near $79.9 after a soft NFP report, with CPI and retail sales ahead likely to decide whether prices extend toward $82...
Quick overview
- Silver closed the week near $79.9, supported by softer US labor data and cautious market sentiment ahead of inflation reports.
- The US Non-Farm Payrolls figure missed expectations, indicating a slowdown in hiring momentum, which helped stabilize silver prices.
- Upcoming inflation data, including CPI and retail sales, will be crucial in determining silver's price direction in the near term.
- Silver's outlook remains constructive as long as it stays above $79.9, with potential upward movement towards $82 if conditions remain favorable.
Silver finished the week close to $79.9, having enjoyed a modest boost as markets took a closer look at softer US labour data and adopted a cautious approach ahead of key inflation announcements. Despite the price action being fairly steady heading into the close, silver remains in an upward trend, which is starting to look more like consolidation than losing steam.
Not dissimilar to gold, silver’s performance is all about finding a balance between slowing growth and ongoing inflation concerns.
Soft NFP Data Kept Silver Supported Last Week
The macro data that came out last week didn’t do any harm to precious metals – in fact, it actually helped. The US Non-Farm Payrolls figure came in at just 50K, a miss that suggests hiring momentum is slowing.
Although the average hourly earnings and unemployment rate numbers were slightly more positive, they were sufficiently offset by the headline miss to prevent the dollar from getting too strong and keep a lid on interest rate expectations.
Earlier numbers echoed this same vibe. The ADP employment numbers came in at 41K, and JOLTS job openings fell to 7.15M, adding to a trend of labour demand easing slightly. The ISM Services PMI was in expansion territory, but manufacturing is still contracting, which is making us more worried about the unevenness of the economy.
For silver, it’s usually in the benefit camp when conditions like these are in place, so we see more stability in the price rather than a sharp downturn.
CPI and Retail Sales Set the Tone for the Week Ahead
Our focus is now on what happens next week. With inflation data due out, we’ll get a pretty good idea of where things are headed in the next few days. The core CPI is forecast to be 0.3% higher on the month, slightly above the previous reading, while headline CPI is expected to remain unchanged.
The annual rate of inflation is expected to remain at 2.7%, indicating the slowdown isn’t showing any signs of slowing.
Markets will also be keeping an eye on retail sales and PPI numbers, which are expected to show some growth, but we’ll have to wait and see how these numbers actually pan out.
If they’re a bit worse than forecast, we might see expectations for a more accommodative policy outlook reinforced, which would be good news for silver and gold too. However, if inflation numbers are a bit higher than expected, we’ll likely see the upside capped, and we might have to deal with a bit more consolidation.
Silver Price Forecast: Inflation Data to Decide the Next Break
Looking at things from a bigger picture, silver enters the new week with a bias that is still pretty constructive – as long as it can keep its head above water above that recent support at $79.9. If it stays in that area, we see a push towards $82, and a sustained break above that would then start to make $85 look a bit more attractive.
On the other hand, if it breaks below $77.5, we’ll know we have a bit more to worry about regarding the trend. For now, it’s not showing as much reaction to the news as gold is, but it’s still closely tied to how inflation expectations are moving. While things are still a bit uncertain, it will likely follow shifts in policy expectations rather than lead the way.
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