Weakening US inflation encourages buying in silver

13 July 2023 156
Weakening US inflation encourages buying in silver

Our expectations were met! Inflation in the US proved to be lower than forecasted. The precious metals market showed strong positive dynamics, which may be the beginning of a rally. Silver, which has a higher beta to gold, grew stronger. However, its growth potential has not yet been exhausted.

Confirmation of easing inflationary pressure in the US is an important growth driver for gold and silver. It is quite possible that these metals will update their highs by the end of the year.

US inflation data released yesterday raised hopes that the Federal Reserve's (Fed) monetary policy tightening would soon end.

Year-on-year US consumer price growth slowed to 3% in June and recorded its smallest gain in more than two years. Inflation is falling, but not fast enough to force the Fed to stop hiking interest rates later this month.

Much attention remains focused on the next central bank meeting, which could determine precious metals prices in the short term, according to Brian Lan of Singapore-based dealer GoldSilver Central.

Some analysts maintain a positive view on precious metals.

Nicky Shiels, head of metals strategy at MKS PAMP, maintains a positive view on precious metals for the end of 2023 in her latest forecast. The analyst is optimistic about silver. She keeps its average target price at $24 per ounce. The metal will likely trade in the range of $21.5–27.0 in the second half of the year. The significant supply-demand imbalance for silver continues to support the long-term bullish outlook for the precious metal.

Shiels’s analysis suggests that the Fed will not lose the fight against inflation, and in doing so, will not destroy the US economy.

According to technical analysis, the silver price has broken above the uptrend. Now the prices are at the resistance level, which could be broken upwards, judging by the latest economic data.

The level of 24.65 is the growth target. It contains the next important level, which may prevent growth. A stop-loss could be placed upon reaching the upper boundary of the uptrend, which was broken yesterday. It matches the price of 23.75.

Silver price growth:

Take profit – 24,65

Stop-loss – 23,75

This content is for informational purposes only and is not intended to be investing advice.

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