Fresh PCE data fuels more Fed fears
The Fed’s favourite measure of inflation, the price index for personal consumption expenditures (PCE), went up 0.6% in January after going up 0.2% in December. Consumer spending, which makes up more than two-thirds of the US economy, went up 1.8% last month, which was more than the 1.3% rise that economists had predicted.
Thursday’s revision of US GDP data for the fourth quarter showed that the economy had slowed more than expected because of high interest rates. This was good news for silver. The reading gave some people hope that the Fed won’t be able to keep raising rates as fast as it has been.
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Yet, silver’s futures contract opened on Friday with a big drop, which is another sign that the market is weak. Silver trading is very sensitive to traders’ willingness to take risks. Silver will have a hard time with a lot of worries out there. This is especially true if the US dollar starts to get stronger, since there is a strong link between the two markets.
Remember that silver isn’t just a precious metal. It’s also used in a lot of different ways in the industry. As a result, there are worries about whether or not the coming recession will lower demand for silver, which would mean that prices have to come down.
Data is not in favor of the bulls
The price of the silver metal goes down again and the early-week drop gets longer. Silver futures for March delivery, which will expire soon, is trading 2.5% lower. Currently below the $21 area.
With the new risk sentiment, silver already broke the 200-day SMA at $21. This signals another bearish ride. In case the bears prevail, we could be seeing supports at prices from early November 2022 around the $19 mark. Bulls will keep targeting prices above the 200 day SMA of $22 and more.
Silver futures 1D chart, source: tradingview.com, author’s analysis