Silver (XAG/USD) Price Forecast: Silver Holds Near $58 as Softer US CPI Meets Supply Deficit

Silver (XAG/USD) trades near $58 as softer US inflation supports precious metals. See today’s silver price forecast, key technical levels, and what’s driving XAG/USD.

Silver (XAG/USD) is set to trade at $58.37 on Wednesday after making a market correction after a 2% session rally on Tuesday. Gains for precious metals were influenced by the weaker US dollar from declining US inflation and reduced anticipated aggressive Federal Reserve policies.

However, the impact of surging crude prices and the waiting game on future rate decisions also effect on silver’s consolidated range.

Why is Silver Trading Under the Consolidated Range?

The latest US Consumer Price Index (CPI) reveals a declining annual inflation rate of 3.5% in June. As of late, financial market participants have been less certain about the anticipated aggressive Federal Reserve monetary Policies.

Weaker US dollar means that precious metals, including silver, are more attractive to foreign buyers while declining real interest rates reduces the cost of holding non interest-yield financial instruments.

The outlook for crude oil means that inflation is not done yet. Considering the recent crisis and conflict in the Middle East, oil prices have once again risen to over $80 a barrel causing a serious inflation risk to the ever increasing costs of oil in the near future.

If inflation is indeed more persistent, the Federal Reserve may keep a tighter policy for longer, this will have a negative effect on precious metals, including silver.

Supply Deficit Continues to Support Silver Prices

Current volatility levels in the silver markets are being sustained by the relative fundamentals supply/demand. The Silver Institute is forecasting a supply deficit in the Silver markets for the next six consecutive years and an estimated 46.3 million ounces of silver will be demanded in excess of the available supply.

Though improvement in recycling will help silver supply, demand is expected to increase beyond supply.

Increasing demand for investments is putting upward pressure on prices. This year, physical investment is expected to increase by 20%, which will help offset the expected decreases in silver jewelry and industrial demand.

The solar sector is a potential threat, as solar manufacturers are leaning toward less expensive low-silver technologies.

Silver (XAG/USD) Price Forecast: Key Levels to Watch

Current silver prices (XAG/USD) are in a potential consolidation phase and may be on the verge of greater price movement.

Current market conditions are less favorable for a silver price increase, as prices stay below the 50 and 200 day EMAs, which are at $59.37 and $64.20 respectively. The RSI is at 45, which is neutral showing an equal balance of buyers and sellers.

Current price support is at $56.90. If silver prices break below this, the next support will be at $55.72 and $54.48.

Current price resistance is at $59.11. This price coincides with resistance from the trendline. Resistance will be broken if price exceeds $59.11. Greater price increases will then be expected with targets of $60.40, $61.86, and $63.31.