Silver Analysis: Silver's upward momentum is strongly supported by a significantly lower-than-expected CPI.
2025-12-18 22:12:37
Data released by the U.S. Bureau of Labor Statistics (BLS) on Thursday (December 18) showed that the U.S. Consumer Price Index (CPI) rose 2.7% year-on-year in November, significantly lower than the market consensus of 3.1%, and further cooled from 3.0% in September (October data was canceled due to the government shutdown).
Core CPI (excluding volatile food and energy prices) rose 2.6% year-on-year, also below the expected 3.0%, marking a key signal of recent inflation cooling.
It is worth noting that this report still does not include October CPI data or November month-on-month data—data collection was interrupted in the first half of November due to the government shutdown, and the data in this report is pieced together based on the statistical results from the latter half of the month, so the accuracy of the statistics is still questionable.
Market reaction immediately: After the data was released, the US dollar index quickly came under pressure and fell, reaching 98.30 during the session, a drop of 0.1% on the day; silver rose rapidly to $66.37 in the short term, an increase of about 0.27%.
Silver Price Forecast: CPI Breakthrough Strengthens Bullish Momentum
Prior to the release of the CPI data, spot silver prices hovered below their historical high of around $66.90, with traders cautiously adjusting their positions and market activity remaining thin. However, as the November CPI data came in, which was significantly lower than expected, silver immediately saw a surge in buying.
The unique characteristics of this CPI data remain: the government shutdown prevented the release of the October CPI report, and the November data was pieced together from statistics collected in the latter half of the month, lacking month-on-month data for interpretation and potentially failing to fully reflect price trends in early November. However, even with these statistical flaws, the overall CPI of 2.7% and the core CPI of 2.6% both fell significantly below the 3% mark and entered the "2%" range. This result had a far greater impact on market sentiment than the data's inherent flaws, directly reversing previous market concerns about persistently high inflation.
From a technical perspective, the main trend for silver is upward. The positive CPI data has propelled silver towards its historical high of $66.90. A successful break above this resistance level would signal a renewed acceleration of the upward trend, with the next target at $68.30 (the 261.8% Fibonacci extension of the October-November rally). If it fails to break through $66.90 in the short term, a slight pullback is possible, but strong support lies below. The key support level at $64.32 (the 100-hour moving average) will provide a significant buffer for the bulls.
"2% inflation" settled: Why has it had such a profound impact on the market?
Some scholars, including Interactive Brokers economist José Torres, had previously predicted that the inflation rate might fall back to the "2%" range, emphasizing the crucial psychological difference between the "2%" and "3%" ranges. The current overall CPI of 2.7% and core CPI of 2.6% not only broke through the "2%" barrier but also significantly fell short of the optimistic expectation of 2.9%. This result will significantly strengthen market expectations for a Federal Reserve rate cut in 2026.
Logically, the significant cooling of inflation data will open up room for the Federal Reserve to further cut interest rates in 2026: on the one hand, the easing of inflationary pressures reduces the necessity for the Federal Reserve to maintain high interest rates; on the other hand, the real yield (Treasury yield - inflation rate) will decline as inflation falls, significantly reducing the opportunity cost of holding silver, a non-interest-bearing asset, thereby further boosting the demand for silver.
Previously, Victoria Fernandez of CrossMark warned that statistical flaws in the data could cause fluctuations of 0.1 percentage points that would not be enough to shake the Federal Reserve's policy. However, the 0.4 percentage point drop in the overall CPI and the 0.4 percentage point drop in the core CPI far exceeded the market's expected fluctuation range. Even if there were flaws in the data, it was enough to send a clear signal to the market that "inflation is cooling down." The previous cautious view was overturned by the market reaction.
Bullish dominance consolidated: Supported by both fundamentals and policy expectations.
The medium- to long-term positive factors for silver remain unchanged: tight global silver supply, stable industrial demand, and continued defensive buying support silver prices near historical highs. The release of the recent CPI data further strengthens this support from a policy perspective – market expectations for a Fed rate cut have risen ahead of schedule, and the weakening dollar trend is becoming increasingly clear, providing additional momentum for silver's rise.
From the perspective of key market price levels, $64.32 remains the core short-term support level (100-hour moving average), which is also the previously recognized "watershed between bulls and bears": as long as silver prices hold this support level, the bulls will continue to dominate the market trend before the end of the year; if it breaks down unexpectedly, it may trigger a phase of profit-taking, but considering the current strong expectations of interest rate cuts, the downside may be limited.
(Spot silver 1-hour chart source: EasyForex)
Key price movements traders should watch after the CPI release.
The 2.7% CPI figure was significantly lower than expected, directly triggering a chain reaction in the market: rising expectations of interest rate cuts, a weakening dollar, and an influx of silver buying. Two key areas to watch going forward are:
Upward breakout: If buying pressure continues to exert its strength, pushing silver above the historical high of $66.90, it will open up new upside potential, with a short-term target of $68.30 (Fibonacci extension level) and even a challenge of the $70.00 psychological level.
Short-term pullback: If the price encounters resistance near the $66.90 level, a slight pullback may occur. However, the support level for the pullback has moved up to $65.50 (near the intraday low). If the pullback does not break this level, it will remain within the scope of strong consolidation, and there is still a possibility of another attempt to reach higher levels.
Short-term market outlook
Market sentiment has shifted from "cautious waiting" to "clearly bullish," with the bulls strengthened and no longer reliant on specific conditions. This significant drop in CPI not only provided immediate upward momentum for silver but also solidified the medium- to long-term upward logic—the combination of easing policy expectations, a weak dollar, and a tight supply-demand balance in silver will drive silver along the path of least resistance upwards.
In the short term, silver prices will likely fluctuate around the historical high of $66.90. Whether or not this level is broken will determine the pace of the upward trend before the end of the year. However, even if a short-term pullback occurs, it is unlikely to change the current strong upward trend. Traders should pay close attention to the performance of the $66.90 resistance level and the $65.50 support level, and position themselves accordingly.
Core CPI (excluding volatile food and energy prices) rose 2.6% year-on-year, also below the expected 3.0%, marking a key signal of recent inflation cooling.
It is worth noting that this report still does not include October CPI data or November month-on-month data—data collection was interrupted in the first half of November due to the government shutdown, and the data in this report is pieced together based on the statistical results from the latter half of the month, so the accuracy of the statistics is still questionable.
Market reaction immediately: After the data was released, the US dollar index quickly came under pressure and fell, reaching 98.30 during the session, a drop of 0.1% on the day; silver rose rapidly to $66.37 in the short term, an increase of about 0.27%.
Silver Price Forecast: CPI Breakthrough Strengthens Bullish Momentum
Prior to the release of the CPI data, spot silver prices hovered below their historical high of around $66.90, with traders cautiously adjusting their positions and market activity remaining thin. However, as the November CPI data came in, which was significantly lower than expected, silver immediately saw a surge in buying.
The unique characteristics of this CPI data remain: the government shutdown prevented the release of the October CPI report, and the November data was pieced together from statistics collected in the latter half of the month, lacking month-on-month data for interpretation and potentially failing to fully reflect price trends in early November. However, even with these statistical flaws, the overall CPI of 2.7% and the core CPI of 2.6% both fell significantly below the 3% mark and entered the "2%" range. This result had a far greater impact on market sentiment than the data's inherent flaws, directly reversing previous market concerns about persistently high inflation.
From a technical perspective, the main trend for silver is upward. The positive CPI data has propelled silver towards its historical high of $66.90. A successful break above this resistance level would signal a renewed acceleration of the upward trend, with the next target at $68.30 (the 261.8% Fibonacci extension of the October-November rally). If it fails to break through $66.90 in the short term, a slight pullback is possible, but strong support lies below. The key support level at $64.32 (the 100-hour moving average) will provide a significant buffer for the bulls.
"2% inflation" settled: Why has it had such a profound impact on the market?
Some scholars, including Interactive Brokers economist José Torres, had previously predicted that the inflation rate might fall back to the "2%" range, emphasizing the crucial psychological difference between the "2%" and "3%" ranges. The current overall CPI of 2.7% and core CPI of 2.6% not only broke through the "2%" barrier but also significantly fell short of the optimistic expectation of 2.9%. This result will significantly strengthen market expectations for a Federal Reserve rate cut in 2026.
Logically, the significant cooling of inflation data will open up room for the Federal Reserve to further cut interest rates in 2026: on the one hand, the easing of inflationary pressures reduces the necessity for the Federal Reserve to maintain high interest rates; on the other hand, the real yield (Treasury yield - inflation rate) will decline as inflation falls, significantly reducing the opportunity cost of holding silver, a non-interest-bearing asset, thereby further boosting the demand for silver.
Previously, Victoria Fernandez of CrossMark warned that statistical flaws in the data could cause fluctuations of 0.1 percentage points that would not be enough to shake the Federal Reserve's policy. However, the 0.4 percentage point drop in the overall CPI and the 0.4 percentage point drop in the core CPI far exceeded the market's expected fluctuation range. Even if there were flaws in the data, it was enough to send a clear signal to the market that "inflation is cooling down." The previous cautious view was overturned by the market reaction.
Bullish dominance consolidated: Supported by both fundamentals and policy expectations.
The medium- to long-term positive factors for silver remain unchanged: tight global silver supply, stable industrial demand, and continued defensive buying support silver prices near historical highs. The release of the recent CPI data further strengthens this support from a policy perspective – market expectations for a Fed rate cut have risen ahead of schedule, and the weakening dollar trend is becoming increasingly clear, providing additional momentum for silver's rise.
From the perspective of key market price levels, $64.32 remains the core short-term support level (100-hour moving average), which is also the previously recognized "watershed between bulls and bears": as long as silver prices hold this support level, the bulls will continue to dominate the market trend before the end of the year; if it breaks down unexpectedly, it may trigger a phase of profit-taking, but considering the current strong expectations of interest rate cuts, the downside may be limited.
(Spot silver 1-hour chart source: EasyForex)
Key price movements traders should watch after the CPI release.
The 2.7% CPI figure was significantly lower than expected, directly triggering a chain reaction in the market: rising expectations of interest rate cuts, a weakening dollar, and an influx of silver buying. Two key areas to watch going forward are:
Upward breakout: If buying pressure continues to exert its strength, pushing silver above the historical high of $66.90, it will open up new upside potential, with a short-term target of $68.30 (Fibonacci extension level) and even a challenge of the $70.00 psychological level.
Short-term pullback: If the price encounters resistance near the $66.90 level, a slight pullback may occur. However, the support level for the pullback has moved up to $65.50 (near the intraday low). If the pullback does not break this level, it will remain within the scope of strong consolidation, and there is still a possibility of another attempt to reach higher levels.
Short-term market outlook
Market sentiment has shifted from "cautious waiting" to "clearly bullish," with the bulls strengthened and no longer reliant on specific conditions. This significant drop in CPI not only provided immediate upward momentum for silver but also solidified the medium- to long-term upward logic—the combination of easing policy expectations, a weak dollar, and a tight supply-demand balance in silver will drive silver along the path of least resistance upwards.
In the short term, silver prices will likely fluctuate around the historical high of $66.90. Whether or not this level is broken will determine the pace of the upward trend before the end of the year. However, even if a short-term pullback occurs, it is unlikely to change the current strong upward trend. Traders should pay close attention to the performance of the $66.90 resistance level and the $65.50 support level, and position themselves accordingly.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
