- Silver price remains on a downtrend as the market digests last week’s events on a hawkish Fed and strong labor market.
- Slowed Chinese export growth is further weighing on the metal.
- On the data front, investors are eyeing the US CPI and PPI numbers later in the week.
Growth concerns
In addition to being a precious metal, silver is also an industrial metal, with its uses spanning from the construction to manufacturing and electrical sectors. As such, its price has edged lower in Monday’s session as the market reacts to the ongoing concerns over slowed global growth.
In particular, the decline in China’s export growth has added to the economic woes in the new week. In addition to being the world’s second-largest economy, it is also the leading consumer of industrial metals such as copper and silver.
Data released earlier in the session showed that Chinese exports rose by 3.9% in April. The figure is a sharp decline from the 14.7% recorded in March. Granted, analysts had expected an even lower pace of 3.2%, the slowest since June 2020. Coronavirus lockdowns and a decline in global demand are largely behind the slowed Chinese export growth. Electronics exports were one of the highly impacted segments.
US inflation data
The market is also digesting last week’s US nonfarm payrolls data and a hawkish Fed; an aspect that is further weighing on the silver price. Data from the Labor Department showed that the payroll growth in April was higher than expected at 428,000. The figures further pointed to a strong labor market amid heightened inflation.
Indeed, the US job sector has been on the key factors behind the hawkish Fed. In the past week, the central bank hiked rates by 50 basis points. On the one hand, the Fed Chair indicated that the officials are not actively considering an increase of 75 basis points. However, some investors are eyeing inflation and labor market data for cues on a more aggressive move by the Fed in coming months.
On the data front, investors will be keen on the US consumer and producer price figures. In the past release, the Labor Department indicated that consumer prices rose by 8.5% in March YoY; the highest level since 1981. Analysts now expect a lower reading of 8.1% for April.
With the previous reading, some experts argue that the inflation figures may have peaked. As such, they will be eyeing April’s CPI data and that of the coming months to confirm if the inflationary pressures are moderating.
With the exclusion of the volatile energy and food components, which have contributed to heightened inflation in recent months, analysts forecast a core CPI reading of 6.0%, down from the past month’s 6.5%. As such, if the numbers come in lower than in the previous month, the silver price may find some support as the rallying of the US dollar eases.
Even so, it will likely have its gains curbed as the greenback continues to trade at a fresh 2002 high at $104.26. The benchmark 10-year Treasury yield also hit an over 4-year high of 3.20% earlier on Monday; further weighing on the non-yielding asset.
Silver price forecast
The silver price has extended last week’s losses into the new week. Notably, the precious metal has been in the red for 14 out of the past 15 sessions. Subsequently, it is in the oversold territory with an RSI of 26. Besides, it remains below the 25 and 50-day exponential moving averages, having formed a mini-death cross about one-and-a-half weeks ago. A death cross, which is a bearish pattern, forms when the short-term moving average (in this case, a 25-day EMA) crosses the long-term one (50-day EMA) to the downside.
As of the time of writing, the silver price was at 22.11. In the immediate term, I expect it to continue finding support at the psychological level of 22.00. With the probable corrective rebound, it may trade within a horizontal channel, with the range’s upper border being at 22.83.
As the week unfolds, a strong US dollar may give the bears an opportunity to hit a fresh year-to-date low of 21.43. However, this bearish thesis will be invalidated by a move above the psychologically crucial level of 23.00.
