Introduction
Silver prices are facing a volatile market environment as key U.S. economic reports raise concerns about growth and inflation. The metal is holding steady near a critical support level, but traders are keenly focused on the 50-day moving average at $32.66 as a signal for the next big move. Will silver bulls regain control, or is further downside ahead?
Silver Technical Setup: $32.19 Support Holding Strong
Despite a slight dip in silver prices, the market remains buoyed by support at the critical $32.19 level. A failure to hold this support could lead to a deeper retracement, potentially toward the $31.45 level. However, for now, the XAG/USD pair is hovering around $32.74, down $0.20 or -0.61% at the time of writing.
Macroeconomic Headwinds: U.S. Growth Contracts, Inflation Rises
The recent U.S. economic data has put pressure on silver prices. First, a disappointing ADP payroll report showed only 62,000 new jobs added in April, far below expectations of 120,000. The GDP contraction of 0.3% in Q1, coupled with a surprise 3.5% spike in core inflation, is intensifying concerns over the Federal Reserve’s next move. Despite this, the market is still pricing in rate cuts, with traders expecting support for growth despite persistent inflation.
The Silver 50-Day Moving Average: Key to Short-Term Momentum
Silver’s 50-day moving average at $32.66 is proving to be a critical level for short-term momentum. A sustained move above this average could reignite bullish sentiment, pushing the price toward the recent high of $33.70. However, if silver fails to break above this key technical level, further consolidation within the $32–$33.70 range is likely.
Market Outlook: Cautious Sentiment as Yields Rise
The rise in Treasury yields, fueled by the hot inflation data, is adding complexity to the silver outlook. Silver, often seen as a safe haven in times of economic uncertainty, is battling against a stronger U.S. dollar due to the rise in yields. With the Fed meeting upcoming, the markets are split on whether the central bank will prioritize combating inflation or supporting economic growth.
GDP Contracts as Inflation Accelerates
The U.S. economy shrank 0.3% in the first quarter, falling well below expectations for 0.4% growth. The miss was largely driven by a 41.3% surge in imports, as firms front-loaded purchases ahead of tariff hikes. While consumer spending remained positive, it slowed notably to a 1.8% pace, and inflation surprised to the upside. The core personal consumption expenditures index jumped 3.5%, up from 2.4% in Q4—well above the Fed’s 2% target.
Yields Rise on Hot Inflation Data
Treasury yields edged higher, with the 10-year gaining 2 basis points, as traders digested the inflation components of the GDP report. Markets are still pricing in a rate cut in June and multiple cuts by year-end, suggesting traders believe the Fed may prioritize supporting growth even as inflation remains sticky. However, the inflation surprise has introduced new uncertainty ahead of next week’s Fed meeting.
Short-Term Outlook: Cautious Bias with Support in Focus
With GDP in contraction and inflation reaccelerating, silver is caught between safe-haven interest and a stronger dollar driven by rising yields. Unless the $32.19 support gives way, the market may consolidate in the $32–$33.70 range. A clean move above the 50-day average could shift sentiment back toward the upside, but for now, sellers appear to have a slight edge.
Conclusion: Eyes on the $32.19 Support Level
As silver prices hover near critical support, traders remain on edge. The upcoming U.S. economic data and the Federal Reserve’s response will be crucial in determining the next move for silver. A clean break above the 50-day moving average could bring the bulls back into play, but for now, cautious sentiment and macroeconomic concerns may keep silver’s short-term outlook in check.
Related: Gold vs Silver: Which Precious Metal Is Poised for Growth?
