Silver Price Upside Faces Major Hurdle, Looks For Inflation Data Volatility

Summary:
• Silver price has faced resistance at $28.00 for the past seven days, but softer US CPI figures could pave the way to move past that mark.

Silver price fell on Tuesday, declining by 1 percent to trade at $27.66 per ounce at press time. The greyish metal was attempting to recover after trading near three-month lows last week, but the impending release of US Consumer Price Index (CPI) data put breaks on further gains in Tuesday’s session. Silver price has traded below the psychological round figure of $28.00 for the past week, and a break above that mark could create the sentiment needed to sustain an upside in the near-term.

Both gold and silver have had a good run this year, but ran into headwinds in recent weeks as recession fears drove some investors to take profits on their holdings. Silver has been the worst hit, after recent economic data showed declining manufacturing activity in China. As of this writing, gold price was up by 2 percent in the last month, while its year-to-date gains stood at 19.1 percent. On the other hand, silver price was up by 15.8 percent year-to-date and down by -32 percent on the monthly chart.

The anticipated Fed interest rate cut in September has provided support for silver amidst its demand-side fears, and Wednesday’s release of US CPI data could provide guidance as to whether we are likely to see 25 or 50 basis points cuts.

Silver price momentum

The sellers currently have the upper hand on XAUUSD, as shown by the momentum indicators on the 2-hour chart. The price has recently broken below the middle Bollinger Band, marginally below the $28.00 mark. Meanwhile, the Relative Strength Index (RSI) is at 52, which signals that the momentum could be shifting to the buyers. It is worth noting that the most recent candlestick has a long wick to the downside, signaling that a reversal could be in the offing.

Support and resistance levels

The silver price momentum will likely continue to the downside if resistance persists at 27.71. In that case, the first support will likely come at 27.60. However, that mark could be breached if the bears extend their control, in which case the next support could come at 27.50.

On the other hand, a move above 27.71 will favour the bulls to take control. That could see the establishment of the first barrier at 27.82. However, further control by the bulls could breach the first resistance and invalidate the downside narrative. Also, it could lead to further gains to test 27.90.