Silver’s Rebound Halted as Strong US Data Boosts Dollar

Silver (XAG/USD) saw its recent rebound stall, slipping to the $38.00 mark on Thursday as a resurgent US Dollar weighed on the precious metal. The decline follows the release of unexpectedly strong US economic data, which has led traders to reassess the likelihood of near-term interest rate cuts by the Federal Reserve.

The catalyst for silver’s reversal was a pair of reports that painted a picture of a resilient US economy with persistent inflationary pressures. The US Producer Price Index (PPI) for July surged by 0.9% month-over-month, a significant jump that far exceeded the consensus forecast of 0.2% and marked the sharpest increase since June 2022. This pushed the annual PPI rate to 3.3%, well above the anticipated 2.5%. This inflation data, following a slightly hotter-than-expected core Consumer Price Index (CPI) report earlier in the week, suggests that price pressures remain a challenge for the Fed.

Adding to the dollar’s strength were encouraging labor market figures. Initial Jobless Claims for the week ending August 8 fell to 224,000, outperforming expectations and indicating a tight labor market. The US Dollar Index (DXY), which measures the greenback’s value against a basket of six major currencies, climbed back above the 98.00 level, recovering from a two-week low.

After failing to sustain a rally above the $38.50 resistance level, silver has entered a consolidation phase, trading between $38.50 and $37.50. The momentum for XAG/USD is now seen as neutral as the market digests the implications of the latest economic data. As the US Dollar firms on the prospect of a more hawkish Fed, silver’s recent gains are under pressure, and its short-term outlook will likely depend on the evolving narrative around inflation and monetary policy.