Silver Price Forms Break and Retest Ahead of US CPI Data


The price of silver has performed well recently although concerns about the Federal Reserve remain. It is trading at $22.52, around 2.85% above the low level this month. This price is also around 12% lower than last year’s high.

Silver is both a precious metal and an industrial metal. As a precious metal, its price is usually affected by the actions of the Federal Reserve. On the other hand, as an industrial metal, silver does well when the economy is doing well due to growing demand.

The biggest concern among silver traders recently is that the Fed should start tightening monetary policy in an effort to deal with rising inflation. Analysts expect the Fed to end its quantitative easing policy in March and then immediately start raising interest rates.

On the positive side, there is still strong demand for silver as the global economy reopens. Evidenced by the fact that manufacturing and industrial production has increased recently.

The next big silver price catalyst will be a testimonial from Jerome Powell. In his prepared remarks, he said:

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“We know that high inflation takes its toll, especially for those who are less able to afford the higher costs of essentials like food, shelter and transportation. We are firmly committed to achieving our statutory objectives of maximum employment and price stability.

The testimony will come a day before the latest US consumer inflation data. Analysts expect data to show headline CPI rose to 7% in December while core CPI jumped to 5.4%.

Silver Price Prediction

The four-hour chart shows that the price of silver has been trending up over the past few trading sessions. It is trying to break above the 25 and 50 day moving averages.

However, a closer look shows that it is forming an ascending wedge pattern, which is usually a bearish sign. It is also slightly below the key resistance at $22.58, which was the neckline of the double top pattern that occurred in December. Therefore, this bounce is a break and retest pattern.

As such, the price of silver is likely to resume its downtrend and retest this month’s low at around $22. This view will be invalidated if it exceeds $23.

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