XAG/USD recovers to the mid-$22.00 level ahead of major US core PCE data

  • Silver is on top ahead of US core PCE data as the dollar and US yields hover at monthly lows.
  • The upcoming inflation data around 1230 GMT will be considered in the context of how it affects Fed tightening expectations.
  • A surprise down could take silver towards $23.00, while a surprise up could send it back below $22.00.

Spot silver (XAG/USD) prices rose to near three-week highs in the mid-$22.00 a troy ounce on Friday ahead of the release of key US core PCE inflation numbers for April, which were traded as US dollars and US bond yields have risen Probe the monthly lows. A weaker dollar helps USD-denominated commodities attract foreign investor demand, while a fall in bond yields represents a lower “opportunity cost” of holding non-profitable assets (like precious metals).

From the current level of $22.30, XAG/USD is trading more than 1.5% higher on Friday, extending its weekly gains to around 2.8% and gains closer to 9.0% from earlier monthly lows . Since spot silver posted multi-month lows mid-$20.00 on May 13, the DXY is down about 3% and the US$10-year is down about 17 basis points.

The forthcoming US core PCE inflation data around 1230 GMT will come under the usual scrutiny and could trigger a choppy market reaction. Increasingly, analysts believe that US inflation may now have peaked and may ease later in the year, allowing the Fed to halt rate hikes once it returns to neutral (around 2.5%). The coming dates will therefore be considered in the context of whether they support or reject this narrative.

The MoM price gain according to the Core PCE Price Index will be the most closely watched number. If the prints come in line or lower with consensus forecasts and last month’s 0.3% read, the recent USD weakness/US yield downside could well extend. In this scenario, XAG/USD might have a chance to retake a grip from $23. If it surprises to the upside, a quick drop to $21.00 could be on the cards.

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