On Wednesday (August 12) during Asian trading hours, international silver (XAG/USD) strengthened, rising 1.1% to around $65.40. The market is holding its breath awaiting the July US CPI inflation data, which, due at 8:30 PM Beijing time, will directly impact expectations for the Federal Reserve's monetary policy and become a key variable determining the short-term direction of silver. However, the situation in the Middle East pushing up oil prices will also somewhat limit the upside potential of silver. Coupled with mixed technical signals, silver is at a crucial turning point.

Inflation data influences precious metal pricing logic

The market generally expects the US overall CPI to rise 3.4% year-on-year in July, a slight decrease from 3.5% in June; the core CPI, excluding food and energy, is expected to rise 2.5% year-on-year, lower than the previous value of 2.6%. On a month-on-month basis, the overall CPI and core CPI are expected to rise by 0.1% and 0.2%, respectively. The strength of inflation data will directly change the market's judgment on the Federal Reserve's interest rate hikes. In his previous policy statements, Federal Reserve Chairman Kevin Warsh warned of upside risks to inflation while stating that the committee would continue to push inflation back to the 2% target level. Geopolitical variables are also significant. Disruptions from the Middle East conflict have tightened global energy supplies and driven up oil prices, limiting the potential upside for silver. Kpler data shows that the Strait of Hormuz, which handles nearly 20% of global energy transport, saw only six ships pass through on August 10th, far below the ten-day average of 11, and a precipitous drop compared to the pre-conflict daily volume of 130-140 ships. Regarding trading mechanisms, CME Group stated that the market response to the launch of 1-ounce gold futures on July 24th has been positive. The exchange plans to open 24-hour trading for 100-ounce silver futures contracts starting in September, which will further enhance the liquidity of the silver market.

Technical Analysis of Silver

From a daily chart perspective, silver is currently trading around $65.30, having stabilized above the 20-day exponential moving average at $61.28, consolidating the short-term bullish trend. The price is gradually breaking out of its previous consolidation range, with the 14-period Relative Strength Index (RSI) at 61.21, within bullish territory but not yet overbought, indicating sufficient upward momentum and no excessive overextension. During pullbacks, the 20-day exponential moving average at $61.28 is a key support level and a crucial defense line for this rebound. If prices fall back, this level will be a vital defensive position for the bulls. On the upside, if silver effectively breaks through the August 10 high of $66.25, it will open up further upside potential, potentially challenging the June 17 high of $71.65.

Conclusion

In summary, silver is currently influenced by multiple factors, including US inflation data, Middle East geopolitics, and technical patterns. If CPI data exceeds expectations, it will reignite expectations of a Fed rate hike, suppressing silver prices. Conversely, if inflation continues to cool, it will provide further upward momentum for precious metals. Meanwhile, rising oil prices from the Middle East will create a two-way pull, potentially amplifying short-term price volatility. New York silver futures daily chart source: FX678. At 13:41 Beijing time on August 12, New York silver futures were trading at $65.43 per ounce.