PCE Report to Drive Silver Price Action Amid Rate Cut Speculation

Silver prices face critical resistance levels ahead of Thursday’s U.S. Personal Consumption Expenditures (PCE) price index release, with traders showing caution near significant technical barriers. The precious metal encounters notable resistance at $34.50, with additional hurdles at $34.87 and $35.40, while support rests at $32.49, just above the 50-day moving average at $32.12.

Economic Indicators

Market expectations for September’s core PCE, the Federal Reserve’s preferred inflation gauge, project a decline to 2.6% year-over-year from August’s 2.7%. The headline PCE is anticipated to ease to 2.1% from 2.2%. Goldman Sachs recently adjusted its monthly core PCE forecast upward to 0.26%, suggesting mild inflationary pressures persist.

Rate and Dollar Impact

A stronger-than-expected PCE reading could strengthen the U.S. dollar as markets reassess rate cut expectations. The dollar index currently shows sensitivity to inflation data, with upward pressure likely if the PCE suggests persistent inflation. This scenario would create immediate headwinds for silver prices. Conversely, a PCE reading at or below consensus could weaken the dollar and support silver, as markets would likely reinforce expectations of near-term rate cuts.

Rate Cut Implications

Futures markets currently price in a 96% probability of a rate cut at the upcoming Fed meeting, with a 70% chance of an additional cut in December. However, recent employment data shows unexpected strength, with ADP reporting 233,000 new jobs in October. The robust labor market data, combined with core services inflation remaining elevated near 4%, increases the risk of delayed rate cuts, potentially pressuring silver prices.

Technical Analysis

The silver market displays vulnerability below current levels, with the crucial support zone between $32.49 and $32.12 representing a significant technical threshold. A breach below these levels could trigger increased selling pressure. The stacked resistance levels above $34.50 present formidable barriers to upward momentum.

Market Forecast

The short-term outlook for silver appears bearish ahead of the PCE release. The metal faces a critical juncture where dollar strength and interest rate expectations could drive significant price movement. An above-consensus PCE reading would likely strengthen the dollar and push silver toward the $32.49 support level. The potential for a sustained decline increases if the PCE data undermines current rate cut expectations, particularly affecting silver’s appeal as a non-yielding asset.