Inflation Data Halt Silver Below $70
Silver hovered around $68.35 per ounce on August 27. The US July overall PCE rose 3.7% year-over-year, exceeding market expectations of 3.6%; the core PCE held steady at 3.3% year-over-year, increasing 0.2% month-over-month. This set of data indicates that core inflation hasn't worsened further, while overall price pressures remain elevated, creating market divergence regarding the Federal Reserve's interest rate path.
Prior to the data release, silver had briefly threatened the $70 level. Following the higher-than-expected overall PCE, pressure from the US dollar and yields limited its gains. Silver ultimately held above $68, suggesting that industrial demand and precious metal allocation demand continue to provide support, but bulls lack immediate catalysts to break above $70.
Silver is Influenced by Both Monetary and Industrial Factors
Compared to gold, silver is not only a safe-haven asset but also a crucial raw material in industries like solar energy, electronics, and others. Improving economic growth expectations can provide additional support through industrial demand; however, if high interest rates suppress manufacturing and investment, silver's industrial characteristics can also amplify downward pressure.
After this simultaneous pullback in gold and silver, the market has begun to reassess silver's recovery potential relative to gold. Silver typically exhibits higher volatility than gold, resulting in greater elasticity during trend formations and faster retreats when faced with unfavorable macroeconomic data.
$68, $70, and $65 are Key Levels
$70 remains the most immediate upside resistance. Only an effective and sustained break above this level could potentially open new upward space for the bulls. The area around $68 is the current short-term equilibrium zone; a breach could see the market move towards the $65 support level. The strategy illustrated in the chart also identifies $70 as a stop-loss or invalidation zone for some positions, with $65 viewed as a bearish target.
Going forward, if inflation subsides, the US dollar weakens, and industrial demand expectations improve, silver may have another chance to challenge $70. However, if the Fed adopts a more hawkish stance and real yields continue to rise, the $68 level could be breached. The current situation isn't that the trend has ended, but rather a re-pricing by bulls and bears is taking place below $70.
