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• Silver price moves higher towards $29 even though traders pare Fed large rate cut bets.
• The US Dollar and bond yields rise as the US CPI data for August shows signs of stickiness.
• Investors await the US PPI and the Initial Jobless Claims data.

Silver price (XAG/USD) edges higher towards the crucial resistance of $29.00 in Thursday’s European session. The white metal rises slightly despite investors seem confident that the Federal Reserve (Fed) will start reducing interest rates gradually by 25 basis points (bps) to 5.00%-5.25% this month.

Market speculation for the Fed starting to reduce its key borrowing rates aggressively has diminished significantly as Wednesday’s United States (US) Consumer Price Index (CPI) data for August showed signs of stickiness in inflationary pressures. Annual US core inflation – which excludes volatile food and energy prices – rose in line with estimates and the prior release of 3.2%.

Declining market expectation for Fed interest rate cut by 50 bps has uplifted the US Dollar (USD) and bond yields. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near 101.70. 10-year US Treasury yields rise to 3.67%. Generally, higher yields on interest-bearing assets weigh on the Silver price, given that they increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. But, in this case, the Silver price remains firm.

Going forward, investors will focus on the US Producer Price Index (PPI) data for August, which will be published at 12:30 GMT. The core PPI is estimated to have accelerated further. At the same time, investors will also focus on the US Initial Jobless Claims data for the week ending September 6.

The significance of the jobless claims data has increased in last few weeks as recent comments from a string of Fed officials signal that the central bank has become more concerned over preventing job losses.

Silver technical analysis

Silver price trades in a limited range of $27.70-$29.20 from more than a week. The upside in the white metal remains restricted by the 200-period Exponential Moving Average (EMA), which trades around $28.80.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, exhibiting a sideways trend.

Silver four-hour chart

(This story was corrected on September 12 at 11:30 GMT to say that Silver price trades in a limited range of $27.70-$29.20, not $27.70-$28.20.)

• Gold price turns positive while above $2,500, as US PPI and Jobless Claims data loom.
• The US Dollar holds rebound alongside Treasury bond yields on fading outsized Fed rate cut bets.
• Gold price appears primed for a range breakout, with buyers still hopeful amid a bullish RSI.

Gold price is making a minor recovery attempt early Thursday, as buyers stay hopeful above $2,500. With the US Consumer Price Index (CPI) data out of the way, the focus now turns toward the US Producers Price Index (PPI) and Jobless Claims data for fresh trading incentives.

Gold price looks to US PPI data for fresh impetus

Gold traders bide time and assess the critical US CPI inflation data released on Wednesday, which poured cold water on increased bets of an outsized interest rate cut by the US Federal Reserve (Fed) interest rate cut next week.

Data published by the US Bureau of Labour Statics (BLS) showed Wednesday that the CPI rose 0.2% MoM in August, aligning with the expected 0.2% print. US August core CPI jumped 0.3% MoM vs. estimates of 0.2%. The headline annual CPI inflation ticked a tad lower to 2.5% in August while the core CPI grew 3.2% YoY versus forecasts of 3.2%.

Despite the headline annual CPI figure cooling off, the sticky monthly and yearly core figures prompted markets to rule out an outsized Fed rate cut this month. Markets are currently pricing in an 85% chance of a 25 basis points (bps) cut, compared to 71% before the data, the CME Group’s FedWatch tool shows.

Gold price tested the key $2,530 topside barrier before witnessing a steep decline on the sticky US inflation data, which triggered a fresh recovery rally in the US Dollar (USD) and the US Treasury bond yields.

Despite the pullback, Gold price managed to defend the critical short-term support level near $2,505, keeping it in its three-week-long consolidative range.

In Thursday’s trading so far, Gold buyers seem to have fought back control but lack bullish conviction amid persistent US Dollar strength and an upbeat market mood. However, Gold price could draw support from gains in other precious metals and industrial metals, including Palladium, Nickel, etc, in the face of potential export curbs under consideration from Russia.

Also, traders look to a fresh batch of top-tier US economic data due later on Thursday for further hints on the Fed’s policy, eventually impacting the value of the US Dollar and Gold price.

Gold price technical analysis: Daily chart

Nothing seems to have changed for Gold price from a short-term technical perspective. Buyers continue to stay hopeful as Gold price manages to yield daily closings above the 21-day Simple Moving Average (SMA), now at $2,505.  

The 14-day Relative Strength Index (RSI) has turned flat but still holds firm above the 50 level, backing the case for the bullish potential.

Gold buyers yearn for a sustained breakthrough the record high of $2,532, above which the $2,550 psychological level will come into play.

If Gold price faces rejection once again near the $2,530 supply zone, a correction would ensue, with a daily closing below the 21-day SMA at $2,503 needed to negate the bullish outlook in the near term.

A breach of the latter will challenge the previous week’s low of $2,472, followed by the symmetrical triangle resistance-turned-support at $2,462.   

The red-hot copper rally has cooled off in recent weeks, with prices pulling back from their May all-time high to close below $9,000/t. Just like in the oil markets, sentiment in copper markets has weakened, driven by weak U.S. manufacturing and labor market data, soft China data, and a sizable build in LME inventories. 

Last week, Goldman Sachs downgraded its copper price forecast, due to weakening demand from China. GS now sees copper prices averaging $10,100 per metric ton in 2025, a sharp reduction from its previous forecast of $15,000. Further, Australian mining giant BHP Group (NYSE:BHP) recently downgraded its forecast for China’s copper demand amid concerns about the country’s economic recovery. 

Thankfully for the bulls, the long-term copper outlook remains robust. A couple of months ago, Swiss multinational commodity trading company Trafigura predicted that EVs, Artificial Intelligence (AI), power infrastructure, and automation boom will drive at least 10 million metric tons of additional copper demand by 2035, According to Graeme Train, Trafigura’s head of metals analysis, one third of the 10 million tons of new demand will come from the electric vehicle sector, “A third is electricity generation, transmission and distribution, and the rest is for things like automation, manufacturing capex and cooling systems within data centers,” he said. 

Saad Rahim, Trafigura’s chief economist, has projected that AI alone has the potential to add one million tonnes per annum of copper demand by 2030.

Related: Rystad: Germany Set to Generate 80% of Its Electricity With Renewables by 2030

Jeff Currie, Chief Strategy Officer at The Carlyle Group and former Global Head of Commodities Research at Goldman Sachs, has declared that copper is the new oil and the best trade he has seen in his career. The analyst has pointed out that copper has long been touted as a big winner from the world’s drive towards electrification including electric vehicles and huge grid upgrades. At the same time, Currie notes that it takes years for new copper mining capacity to actually come onstream. However, copper prices have, unexpectedly, pulled back sharply several times over the past two years. Currie says this has created a mismatch between short-term prices and long-term supply, making copper his highest-conviction trade ever.

Meanwhile, a recent study, published by the International Energy Forum (IEF) says the EV revolution alone will drive enough copper demand to outstrip supply in the next couple of decades. According to IEF, current projections show that copper production will increase 82% to hit a massive 37.1 million tonnes by 2050; however, supply will need to increase by an extra 55% to power an all-EV global fleet– equating to the establishment of 194 new mines or six each year till 2050. With an estimated 6.66bn tonnes of global copper resources identified, copper scarcity is not the main issue here, rather than the fact that it takes ~23 years to turn a copper discovery into a functioning mine. The lengthy development time suggests the world is facing a near-impossible task to develop enough mines to meet demand in the available timeframe.

Source: Mining.com

The report, however, notes that if copper recycling remains constant at its 2018 level rather than increasing as assumed, 43 new mines will need to come online every year, with the copper demand gap clocking in at 8.1 million tonnes in 2035 and 9.6 million tonnes in 2040.

It is worth noting that the study used the same methods to arrive at this dire picture as the one used by American geologist M. King Hubbert to accurately predict 30 years of U.S. oil production. However, Hubbert’s model broke when technologies such as hydraulic fracturing, directional drilling and Enhanced Oil Recovery (EOR) made it possible to produce natural gas and crude oil from shale and expanded the hydrocarbon resource. This offers the world a narrow window to expedite the process of bringing new copper mines online.

Hybrids A Potential Solution

IEF has also offered another way to ditch efforts to replace fossil fuel-powered vehicles with all-electric vehicles and instead replace them with hybrids.

“There is remarkably little difference between the amount of copper needed to manufacture hybrid electric rather than ICE vehicles,” with the researchers pointing out that hybrid electric vehicles require 29 kg of copper compared to 24 kg for an ICE (internal combustible engine) vehicle.  “It would therefore be judicious to aim for a transition to the 100% manufacture of hybrid electric vehicles by 2035, rather than transitioning to the 100% manufacture of battery electric vehicles, which require 60 kg. The copper required for this transition is only slightly above baseline and does not require major grid improvements,” the report’s authors said. 

Fossil fuel investors will no doubt be pleased to know that hybrids remain incredibly popular in this age where pure EVs have become dominant, a full 25 years since Toyota Motor Corp. (NYSE:TM) launched the Prius. Nearly 3 million hybrid EVs were sold in 2022, good for nearly 30% of all EVs sold. Hybrids remain popular because they make considerable savings on gas and cut their carbon footprint without the attendant charging anxiety that comes with pure EVs. 

In a hybrid car, there is an ICE component and an electric motor, with battery-stored energy. However, a hybrid can’t be plugged in to charge. Instead, it is charged by the regenerative braking of the internal combustion engine. The extra power provided by the electric motor can potentially allow for a smaller engine, adding some environmental benefits. The battery can also power auxiliary loads and reduce engine idling when stopped, according to the Alternative Fuels Data Center.  

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com

Bottom Satisfied with Daily Close Above 2.30

Once a bottom is satisfied with an upside breakout, plus a daily close above the signal price level, the trend should be ready to progress. Higher, being the more likely direction given the confirmation of the double bottom breakout that defines a bullish trend reversal, from down to up. When measuring the pattern and projecting forward a potential target of 2.72 is suggested. The 61.8% Fibonacci retracement is just below that level at 2.67. Together, they point to a range of potential resistance from 2.67 to 2.72.

Higher Target Starts at 2.89

A higher possible target is identified up around the downtrend line. It converges with a price zone around the 78.6% retracement at 2.89 and a previous interim swing high at 2.92. Natural gas is progressing inside a large symmetrical triangle pattern. The advance off the second bottom recently confirms the pattern.

It also strengthens the possibility of an eventual test of resistance at the top of the triangle. Once the bottom of a swing within the pattern is reversed, there is the potential to test the other side of the pattern to see if resistance is retained or determine when a bullish breakout may be occurring.

Strength Seen Relative to 200-Day MA

One bullish feature of the trend is that today’s session is likely to end with the price of natural gas closing back above the 200-Day MA, after falling below the 200-Day line for the prior couple of days. This type of price behavior shows strength. Nevertheless, the market will be watching for another advance above 2.30, followed by a daily close above that level.

For a look at all of today’s economic events, check out our economic calendar.

XAU/USD Current price: $2,515.75

• The United States Consumer Price Index was roughly in line with expectations in August.
• Financial markets turned risk-averse as Fed expected to trim interest rates by 25 bps.
• XAU/USD met buyers around $2,500, aims to retest record highs in the $2,530 price zone.

Gold price peaked at $2,528.95, flirting with its record high mid-European session. XAU/USD, however, changed course and fell towards the $2,500 level after the release of United States (US) macroeconomic data. The August Consumer Price Index (CPI) rose by 2.5% YoY in August, easing from the 2.9% posted in July and below the 2.6% anticipated by market participants. The annual core reading matched expectations by printing at 3.2%, although the monthly core reading rose by 0.3%, slightly higher than the previous and expected 0.2%.

The news heavily weighed on rate cut expectations, with the US Federal Reserve (Fed) now expected to proceed gradually. Market players expect the central bank to trim the main rate benchmark by 25 basis points (bps) when it meets next week. As the dust settled, concerns receded. US indexes keep trading in the red, but trimmed half of their post-release losses, helping XAU/USD reconquer the $2,510 mark.  

The next first-tier event will take place on Thursday, as the European Central Bank (ECB) will announce its decision on monetary policy. Officials are widely anticipated to trim the three main interest rates by 25 bps each. If anything, a change in President Christine Lagarde’s usual wording can trigger action across financial markets.

XAU/USD short-term technical outlook  

From a technical point of view, the daily chart for the XAU/USD pair shows it remains on the bullish side despite the absence of upward momentum. The pair keeps trading above a bullish 20 Simple Moving Average, finding buyers around it. At the same time, the 100 and 200 SMAs maintain their bullish slopes far below the current level. Finally, technical indicators hold within positive levels, lacking evident directional strength yet maintaining the risk skewed to the upside.

In the near term, and according to the 4-hour chart, XAU/USD offers a neutral-to-bullish stance. The pair develops above converging 20 and 100 SMAs, at around $2,507.00, while technical indicators bounced from around their midlines, maintaining their upward slopes within positive levels.

Support levels: 2,507.60 2,489.60 2,475.70  

Resistance levels:  2,519.75 2,531.60 2,545.00 

• Silver attracts buyers for the third straight day and touches a fresh weekly top on Wednesday.
• The lack of any follow-through buying and mixed technical oscillators warrant caution for bulls.
• A sustained strength beyond the $29.00 mark is needed to support prospects for further gains.

Silver (XAG/USD) trades with a mild positive bias for the third straight day on Wednesday, albeit lacks bullish conviction and is currently placed around the $28.45 region, just below the weekly high touched during the Asian session. 

From a technical perspective, the white metal is holding above the 23.6% Fibonacci retracement level of the August-September slide and looking to build on the momentum beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart. Given that oscillators on the said chart have just started gaining positive traction, though are yet to confirm a bullish bias on the daily chart. Hence, the XAG/USD is more likely to confront stiff resistance near the $28.95-$29.00 confluence – comprising the 50% Fibo. level and the 100-period SMA on the 4-hour chart.

A sustained strength beyond, however, will be seen as a fresh trigger for bullish traders and pave the way for some meaningful appreciating move. The subsequent move up has the potential to lift the XAG/USD beyond the 61.8% Fibo. level resistance near the $29.25 region, towards the $29.65 area, or the 78.6% Fibo. level. The momentum could extend further towards reclaiming the $30.00 psychological mark, above which bulls might aim to challenge the August monthly swing high, around the $30.20 zone. 

On the flip side, the $28.25 region, or the 23.6% Fibo. level is likely to protect the immediate downside ahead of the $28.00 mark. A convincing break below could make the XAG/USD vulnerable to weaken further below the $27.70-$27.65 zone, towards the next relevant support near the $27.20 region en route to the $27.00 mark. Some follow-through selling might then expose the August monthly swing low, around the $26.40-$26.35 area, before the white metal eventually drops to the $26.00 round figure.

Silver 4-hour chart

• Gold price preserves recent gains above $2,500 on US CPI inflation day.
• The US Dollar tracks USD/JPY sell-off amid weak US Treasury bond yields and risk-off flows.
• Gold buyers look to retest record highs at $2,532 after defending 21-day SMA. The daily RSI stays bullish.

Gold price is consolidating a two-day uptrend above $2,500 in Wednesday’s Asian trading. Gold buyers take a breather, with the next directional move likely triggered by the critical US Consumer Price Index (CPI) data due later this Wednesday.

Gold price risks a big reaction to US CPI data

Gold traders have tuned on the sidelines, refraining from placing fresh bets before the US inflation test, which could confirm the size of the US Federal Reserve (Fed) interest rate cut next week. The data is critical to determining the next direction in Gold price, as it hangs close to the record high of $2,532 set on August 20.

US CPI is seen rising 2.6% YoY in August after recording a 2.9% increase in July. The core CPI inflation is expected to hold steady at 3.2% YoY in the same period. Meanwhile, the monthly headline and core CPIs are set to rise 0.2%, at the same pace as seen previously.

An upside surprise to the annual and monthly inflation readings could trigger a fresh US Dollar recovery at the expense of the Gold price, washing out expectations of an outsized Fed rate cut. Conversely, a softer-than-expected headline and core annual CPI data could revive 50 basis points (bps) Fed rate reduction bets, slamming the US Dollar (USD) while propelling Gold price to fresh lifetime highs.

Markets are currently pricing in a 33% chance of a 50 bps rate cut move while the odds of a 25 bps rate cut stand at 67%, the CME Group’s FedWatch Tool shows.

In the lead-up to the US CPI showdown, Gold price stays supported by renewed selling in the US Dollar, courtesy of the steep USD/JPY sell-off. The Japanese Yen spiked to fresh eight-month highs against the USD near 141.50 after the hawkish remarks from Bank of Japan (BoJ) board member Junko Nagakawa. The policymaker signaled the bank’s readiness to hike rates further, highlighting the policy divergence between the Fed and the BoJ.

Meanwhile, the first US Presidential debate between former President Donald Trump and Democratic nominee Kamala Harris in Pennsylvania failed to have any significant impact on the financial markets, as investors traded with caution and scurried to the safety of the US government bonds. This weighed negatively on the US Treasury bond yields, allowing Gold price to stay on the front foot.

Gold price technical analysis: Daily chart

Nothing seems to have changed for Gold price from a short-term technical perspective. Buyers continue to stay hopeful as Gold price managed to close above the 21-day Simple Moving Average (SMA), now at $2,503, for the second day in a row on Tuesday.  

The 14-day Relative Strength Index (RSI) points higher once again while well above the 50 level, justifying the bullish potential.

Gold buyers now aim for a sustained breakthrough the record high of $2,532, above which the $2,550 psychological level will come into play.

If Gold price faces rejection once again near the $2,530 supply zone, a correction would ensue, with a daily closing below the 21-day SMA at $2,503 needed to negate the bullish outlook in the near term.

A breach of the latter will challenge the previous week’s low of $2,472, followed by the symmetrical triangle resistance-turned-support at $2,462.   

The red-hot copper rally has cooled off in recent weeks, with prices pulling back from their May all-time high to close below $9,000/t. Just like in the oil markets, sentiment in copper markets has weakened, driven by weak U.S. manufacturing and labor market data, soft China data, and a sizable build in LME inventories. 

Last week, Goldman Sachs downgraded its copper price forecast, due to weakening demand from China. GS now sees copper prices averaging $10,100 per metric ton in 2025, a sharp reduction from its previous forecast of $15,000. Further, Australian mining giant BHP Group (NYSE:BHP) recently downgraded its forecast for China’s copper demand amid concerns about the country’s economic recovery. 

Thankfully for the bulls, the long-term copper outlook remains robust. A couple of months ago, Swiss multinational commodity trading company Trafigura predicted that EVs, Artificial Intelligence (AI), power infrastructure, and automation boom will drive at least 10 million metric tons of additional copper demand by 2035, According to Graeme Train, Trafigura’s head of metals analysis, one third of the 10 million tons of new demand will come from the electric vehicle sector, “A third is electricity generation, transmission and distribution, and the rest is for things like automation, manufacturing capex and cooling systems within data centers,” he said. 

Saad Rahim, Trafigura’s chief economist, has projected that AI alone has the potential to add one million tonnes per annum of copper demand by 2030.

Related: Rystad: Germany Set to Generate 80% of Its Electricity With Renewables by 2030

Jeff Currie, Chief Strategy Officer at The Carlyle Group and former Global Head of Commodities Research at Goldman Sachs, has declared that copper is the new oil and the best trade he has seen in his career. The analyst has pointed out that copper has long been touted as a big winner from the world’s drive towards electrification including electric vehicles and huge grid upgrades. At the same time, Currie notes that it takes years for new copper mining capacity to actually come onstream. However, copper prices have, unexpectedly, pulled back sharply several times over the past two years. Currie says this has created a mismatch between short-term prices and long-term supply, making copper his highest-conviction trade ever.

Meanwhile, a recent study, published by the International Energy Forum (IEF) says the EV revolution alone will drive enough copper demand to outstrip supply in the next couple of decades. According to IEF, current projections show that copper production will increase 82% to hit a massive 37.1 million tonnes by 2050; however, supply will need to increase by an extra 55% to power an all-EV global fleet– equating to the establishment of 194 new mines or six each year till 2050. With an estimated 6.66bn tonnes of global copper resources identified, copper scarcity is not the main issue here, rather than the fact that it takes ~23 years to turn a copper discovery into a functioning mine. The lengthy development time suggests the world is facing a near-impossible task to develop enough mines to meet demand in the available timeframe.

Source: Mining.com

The report, however, notes that if copper recycling remains constant at its 2018 level rather than increasing as assumed, 43 new mines will need to come online every year, with the copper demand gap clocking in at 8.1 million tonnes in 2035 and 9.6 million tonnes in 2040.

It is worth noting that the study used the same methods to arrive at this dire picture as the one used by American geologist M. King Hubbert to accurately predict 30 years of U.S. oil production. However, Hubbert’s model broke when technologies such as hydraulic fracturing, directional drilling and Enhanced Oil Recovery (EOR) made it possible to produce natural gas and crude oil from shale and expanded the hydrocarbon resource. This offers the world a narrow window to expedite the process of bringing new copper mines online.

Hybrids A Potential Solution

IEF has also offered another way to ditch efforts to replace fossil fuel-powered vehicles with all-electric vehicles and instead replace them with hybrids.

“There is remarkably little difference between the amount of copper needed to manufacture hybrid electric rather than ICE vehicles,” with the researchers pointing out that hybrid electric vehicles require 29 kg of copper compared to 24 kg for an ICE (internal combustible engine) vehicle.  “It would therefore be judicious to aim for a transition to the 100% manufacture of hybrid electric vehicles by 2035, rather than transitioning to the 100% manufacture of battery electric vehicles, which require 60 kg. The copper required for this transition is only slightly above baseline and does not require major grid improvements,” the report’s authors said. 

Fossil fuel investors will no doubt be pleased to know that hybrids remain incredibly popular in this age where pure EVs have become dominant, a full 25 years since Toyota Motor Corp. (NYSE:TM) launched the Prius. Nearly 3 million hybrid EVs were sold in 2022, good for nearly 30% of all EVs sold. Hybrids remain popular because they make considerable savings on gas and cut their carbon footprint without the attendant charging anxiety that comes with pure EVs. 

In a hybrid car, there is an ICE component and an electric motor, with battery-stored energy. However, a hybrid can’t be plugged in to charge. Instead, it is charged by the regenerative braking of the internal combustion engine. The extra power provided by the electric motor can potentially allow for a smaller engine, adding some environmental benefits. The battery can also power auxiliary loads and reduce engine idling when stopped, according to the Alternative Fuels Data Center.  

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com

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Read this article on OilPrice.com

This story originally appeared on Oilprice.com

• Silver price appreciates as weak US labor data raises the odds of a Fed rate cut at its September meeting.
• CME FedWatch Tool suggests fully pricing in at least a 25 basis point Fed rate cut in September.
• Chicago Fed President Goolsbee stated that Fed officials are starting to align with the broader market’s sentiment of rate adjustment.

Silver price (XAG/USD) inches higher to near $28.00 per troy ounce during the Asian session on Monday. The non-yielding assets like Silver gains ground as weak US jobs data increase the likelihood of a 25 basis-point rate cut by the Federal Reserve (Fed) at its September meeting.

The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) added 142,000 jobs in August, below the forecast of 160,000 but an improvement from July’s downwardly revised figure of 89,000. Meanwhile, the Unemployment Rate fell to 4.2%, as expected, down from 4.3% in the previous month.

Lower interest rates tend to benefit Silver by reducing the opportunity cost of holding non-yield-bearing bullion assets.  According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting.

Additionally, Chicago Fed President Austan Goolsbee remarked on Friday that Fed officials are starting to align with the broader market’s sentiment that a policy rate adjustment by the US central bank is imminent, according to CNBC.

FXStreet’s FedTracker, which uses a custom AI model to evaluate Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10, rated Goolsbee’s comments as dovish, assigning them a score of 3.2.

The potential gains for Silver might be limited due to safe-haven flows, given the recent easing of geopolitical tensions in the Middle East. Israeli forces have withdrawn from Jenin, according to Reuters citing the Palestine news agency WAFA.