Silver Prices On the Edge As US Producer Price Growth Beats Forecast

Summary:
• US Treasury yields have risen beyond 4.3%, while silver prices keep rising on positive demand outlook, and could outperform gold.

Silver prices rose further on Friday, propelled by a weakening US dollar. Silver futures price was up +0.26% and going for $23.010 an ounce at 13.30 UTC at the COMEX market, as spot silver traded at 22.970, after rising +0.19%.

The US dollar has lost some of its upside propulsion over the last two days, weighed in by disappointing core retail sales and continuing jobless claims data. However, the dollar index had recovered some gains at the time of writing, rising +0.35% to stand at 104.650.

Meanwhile, yields on US Treasury have spiked on hotter-than-expected producer price figures. Both 10-year bonds and 5-year bonds were above 4.3% at the time of writing, with the former up 8 basis points, and the latter up 10 basis points. The January US Producer Price Index (PPI) rose by 0.3%, beating the projected 0.1%.  This is bullish news for the dollar, as it confirms the high consumer inflation figures released earlier in the week. Furthermore, it increases the likelihood that the Fed will retain the 5.25%-5.5% interest rates at least until June.

Silver is projected to outperform gold this year, driven by global economic recovery. Furthermore, the Silver Institute estimates that demand for silver will rise to 1.2 billion ounces in 2024, the second-highest level on record. Silver tends to gain more on increased global economic growth, thanks to its use as a luxury metal and in industrial applications. The high January PPI is supportive of higher silver prices in the near-term.  Gold, on the other hand, performs better when the global economy underperforms, thanks to its status as a high-grade safe haven asset.

Technical analysis

The RSI on the 30-minute silver price chart advocates for further upward push. The commodity will likely pivot at $22.70, with the psychological $23.00 being an important level. The current momentum will likely support a push to the first resistance at $23.30. A move beyond that point will bring $23.50 within reach. However, if the momentum reduces, it could put the sellers in control, with the first support at $22.55 being critical. A breach of that support will invalidate the bullish view, putting the commodity on course to test the second support at $22.40.

Silver prices on 30-minute chart