Silver price rebounds after in-line US PCE data eases Dollar support
Silver (XAG/USD) rebounds on Thursday, trading around $58.65 at the time of writing, up 2.16% on the day. The precious metal recovers part of its steep losses from recent days, supported by a modest pullback in the US Dollar (USD) following the release of US inflation data that broadly matched market expectations.
The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index rose 4.1% YoY in May, in line with expectations, up from 3.8% in April. The core PCE Price Index, the Federal Reserve's (Fed) preferred inflation gauge, accelerated to 3.4% YoY from 3.3%, also matching forecasts. On a monthly basis, headline PCE increased 0.4%, while core PCE remained unchanged at 0.3%.
Investors mainly focused on the lack of any major upside surprise in core inflation, prompting a modest decline in the US Dollar. The US Dollar Index (DXY) falls 0.24% to 101.30, providing support for Dollar-denominated precious metals.
Other US data released on Thursday continue to point to a resilient economy. Durable Goods Orders declined 4.5% in May, in line with expectations, while Initial Jobless Claims fell to 215K, below forecasts of 225K. Meanwhile, both Personal Income and Personal Spending increased 0.7% in May, exceeding market expectations.
Against this backdrop, markets continue to expect the Fed to maintain a restrictive monetary policy stance, although the chance of a rate hike in September eased slightly following the inflation report. This environment may continue to limit Silver's recovery potential despite Thursday's rebound.
Silver prices strengthened on Thursday (June 25th) after US inflation data showed results in line with market expectations. Silver, or XAG/USD, traded around US$58.65 per troy ounce, up 2.16% on the day, and managed to recover some of the sharp losses incurred in recent days.
Silver's rise was supported by a slight weakening of the US dollar following the release of US Personal Consumption Expenditures (PCE) data. The data did not indicate a surprise higher-than-expected increase in inflation, thus easing pressure on the precious metal. As an asset priced in the US dollar, silver typically finds support when the dollar weakens.
The Bureau of Economic Analysis reported that the PCE price index rose 4.1% year-on-year in May, in line with market expectations and up from 3.8% in April. Meanwhile, core PCE, the Federal Reserve's preferred inflation indicator, rose to 3.4% year-on-year from 3.3% previously, also in line with expectations.
On a monthly basis, headline PCE rose 0.4%, while core PCE remained at 0.3%. Investors viewed the lack of major surprises in core inflation as a reassuring sign. This caused the US dollar index (DXY) to fall 0.24% to 101.30, giving silver and other precious metals room to rebound.
However, other US economic data still indicated that the economy remains quite strong. Durable goods orders fell 4.5% in May, in line with market expectations. Meanwhile, initial jobless claims fell to 215,000, lower than the 225,000 forecast. Personal income and personal spending both rose 0.7%, exceeding market expectations.
This combination of data suggests that inflation may not be as hot as expected, but the US economy remains quite resilient. Therefore, the market continues to expect the Federal Reserve to maintain a tight monetary policy. Although the likelihood of a September interest rate hike has slightly diminished following the release of inflation data, high interest rate expectations still have the potential to limit silver's recovery.
Given these conditions, silver's current rebound is seen more as a technical recovery after the previous sharp decline. To continue its strong rally, silver needs a deeper dollar weakening, a decline in US bond yields, and a signal that the Fed will not raise interest rates again anytime soon. Until these factors emerge strongly, silver's upside potential remains limited.
Source: Newsmaker.id
