Silver (XAG/USD) experienced a sharp rebound on Friday, trading around $64.30 and up 1.13% on the day, after initially dropping to a three-week low of $62.94 in response to the latest US inflation data [1]. The US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 3.4% year-over-year in August, unchanged from the previous month and matching market expectations. On a monthly basis, headline inflation accelerated to 0.4% from July's 0.1% increase [1].
The core CPI, which excludes food and energy, rose 0.3% month-over-month, slightly above the 0.2% expected by economists, though annual core inflation eased to 2.4% from 2.5% in July [1]. Silver initially faced selling pressure as the stronger-than-expected core reading boosted the US Dollar, reflecting concerns that persistent inflation could prompt further Federal Reserve tightening—a negative for non-yielding assets like silver [1].
However, the US Dollar's gains faded as annual headline inflation showed no renewed acceleration and core inflation continued to moderate on a yearly basis, allowing silver to recover rapidly and return above $64.50 [1]. Market focus also shifted to preliminary University of Michigan consumer sentiment data, which showed the Consumer Sentiment Index falling to 47.8 in September from 51.7 previously. The Current Conditions Index declined to 50.9 from 51.9, and the Consumer Expectations Index dropped to 45.8 from 51.5 [1].
Inflation expectations rose, with the one-year measure increasing to 4.6% from 4% and the five-year measure edging up to 3.4% from 3.3%. Persistently elevated inflation expectations could reinforce the Fed's tightening path and remain a source of volatility for silver and the US Dollar [1]. Technically, XAG/USD trades at $64.53, remaining under pressure below the 100-hour and 200-hour simple moving averages, with initial resistance at $65.28 and support at $62.94 [1].
CONCLUSION
Silver's rapid recovery from a three-week low highlights ongoing market sensitivity to US inflation data and Federal Reserve policy expectations. While the metal remains technically pressured, persistent inflation expectations and shifting sentiment could drive further volatility in the near term.