Silver Price Forecast: Silver slips as US Dollar firms on strong PPI data

• Silver slips to $38.00, snapping a two-day rebound as the US Dollar firms.
• US PPI data shows inflation rising sharply in July, with both headline and core readings well above expectations.
• XAG/USD consolidates between $38.50 resistance and $37.50 support, with momentum turning neutral.

Silver (XAG/USD) edges lower on Thursday, snapping a two-day losing streak as stronger-than-expected US Producer Price Index (PPI) and upbeat Jobless Claims data bolster the US Dollar. At the time of writing, the metal is trading near $38.00 during the American session, down nearly 1.30% on the day.

Earlier in the Asian session, XAG/USD struggled to sustain gains above $38.50, peaking at $38.74 -- its highest level since July 25 -- before sellers pushed prices lower. Meanwhile, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is staging a modest recovery after falling to a more than two-week low on the previous day. The index has climbed back above the 98.00 psychological mark following the release of stronger-than-expected PPI and steady Weekly Jobless Claims, as traders reassess the outlook for Federal Reserve (Fed) rate cuts.

The latest US labor market and inflation data underscore a resilient economy with pockets of persistent price pressure, complicating the Federal Reserve's (Fed) policy outlook. Initial Jobless Claims slipped to 224K in the week ending August 8, better than the expected 228K and lower than the prior week's 227K, while Continuing Claims eased to 1.953 million, narrowly undershooting forecasts.

On the inflation front, July's Producer Price Index jumped 0.9% MoM, the sharpest monthly gain since June 2022 and well above the 0.2% consensus estimate, following a flat reading in June. This pushed the annual rate to 3.3%, surpassing expectations of 2.5% and accelerating from 2.4% previously. The upside surprise in producer prices comes on the heels of an in-line headline CPI and a slightly hotter core CPI earlier this week, suggesting that underlying price pressures remain sticky.

Technical analysis

On the 4-hour chart, Silver (XAG/USD) is consolidating between resistance at $38.75 and support near $37.55, forming a short-term range after sellers emerged near multi-week highs. The metal has pulled back toward the confluence of the 50-period SMA at $38.01 and the 100-period SMA at $37.96, which are acting as immediate pivot levels. A sustained break below this zone could expose the lower boundary of the range, while a rebound would keep the consolidation intact.

Momentum indicators suggest waning bullish pressure. The Relative Strength Index (RSI) has retreated to 45, signalling a neutral-to-slightly bearish setup, while the Moving Average Convergence Divergence (MACD) is showing signs of flattening after a bullish crossover, hinting at potential loss of upside momentum. A breakout above $38.50 could target $39.30-$39.50, whereas sustained weakness below $37.50 would shift focus toward $37.00 and the July 31 swing low.