Silver (XAG/USD) is trading firmly near $87.00 in early European trade on Wednesday, having posted a fresh two-month high of $87.82 earlier in the day [1]. This strength comes despite hotter-than-expected US Consumer Price Index (CPI) data for April, which has increased fears of potential interest rate hikes by the Federal Reserve this year [1]. The US headline inflation accelerated to 3.8% year-on-year, up from 3.3% in March, surpassing expectations of a slower rise to 3.7%. The US core CPI, excluding food and energy, grew at an annualized pace of 2.8%, beating both the 2.7% estimate and the previous reading of 2.6% [1].
Following the CPI release, the CME FedWatch tool shows the odds of the Fed delivering at least one interest rate hike this year have risen to 35.3%, up from 23.5% before the data was published [1]. Typically, rising hawkish Fed bets and a stronger US Dollar, which is trading near its weekly high of 98.46, are negative for non-yielding assets like silver [1]. However, silver has managed to hold its gains, suggesting resilient demand.
In India, the Multi Commodity Exchange (MCX) Silver July Futures have surged over 6% above Rs. 3,00,000 after the Indian government raised import duty on gold and silver to 15% from 6%. This move aims to discourage precious metal purchases and ease pressure on India's foreign exchange reserves [1].
Technical analysis indicates that XAG/USD remains well above the 20-day Exponential Moving Average (EMA) at $78.68, signaling a firm bullish near-term bias. The Relative Strength Index (14) is near 66, showing strong upside momentum but not yet at extreme levels. Initial support is seen at the 20-day EMA, with further support at the May 1 high of $77. If silver breaks above its intraday high of $87.82, it could advance towards $90 and potentially the March high of $96.62 [1].
CONCLUSION
Despite hawkish Fed bets and a stronger US Dollar, silver has maintained its gains near a two-month high, supported by robust technical momentum and increased demand in India following a hike in import duties. The market remains bullish, with potential for further upside if resistance levels are breached.