Oil Price Drop Eases Inflation Fears, Silver Approaches $69.40
During Wednesday's Asian session, silver rose nearly 1%, approaching the vicinity of $69.40. Market expectations that the Strait of Hormuz may reopen soon, leading to a further retreat in oil prices, provided support for the non-interest-bearing precious metal. The strait handles nearly one-fifth of global energy supply. Once shipping resumes, the risk of prolonged energy disruptions and global inflation expectations may both decline.
Iranian Foreign Minister Abbas Araghchi and Omani Foreign Minister Badr Albusaidi discussed a framework for establishing a "provisional joint maritime corridor" to restore safe navigation through the Strait of Hormuz. Decreasing inflation pressure means central banks in many countries may not need to adopt more aggressive interest rate hikes in response to oil price shocks, which is favorable for interest-free assets like silver.
PCE and Jackson Hole to Determine if the Rally Can Continue
The market is also awaiting the U.S. July PCE price index. The core PCE, a key focus for the Federal Reserve, is expected to remain at 3.3% year-over-year, while the month-over-month figure may rise by 0.2%, higher than June's 0.1%. The more significant macroeconomic event this week is the Jackson Hole Economic Symposium. Investors will look for clues on future policy direction from the speech by Federal Reserve Chairman Kevin Warsh.
TD Securities believes the market hopes Warsh will provide a more explicit commitment to fighting inflation, but he may still refrain from giving clear forward guidance, instead continuing to emphasize changes in the policy framework and long-term issues. The firm expects the Fed to keep rates unchanged during its forecast period; if it does act this year, the possibility of a rate hike is actually higher than that of a cut. For silver, this means the benefits from the oil price decline could be partially offset by hawkish interest rate expectations.
$65.12 as Trend Support, $71.56 Decides if a Breakout is Possible
On the daily chart, silver is trading around $69.17, significantly above the 20-day exponential moving average at $65.12, maintaining a short-term bullish bias. The 14-day RSI is at 64.65, within a positive zone but not yet in extreme overbought territory, indicating stable upward momentum without significant exhaustion for now.
If a pullback occurs, the 20-day moving average at $65.12 is the first major support level, which bulls need to defend to maintain the current structure. The key resistance above is the June 17 high of $71.56. Only a break above this level could confirm that silver is starting its next leg up from the $69 platform. If interest rate expectations suddenly turn hawkish, pushing the U.S. dollar and Treasury yields higher, silver might first test the moving average support before choosing its next direction.
