FX.co ★ XAG/USD, SILVER

Following the announcement from the US Treasury Department about its intention to acquire up to $6 billion of 10- to 20-year Treasuries under the ongoing repurchase program, the yield on the 10-year US Treasury bond rose to its highest level since November 2023. According to US economic data reported on Thursday, the Producer Price Index (PPI) grew 5.4% year over year in August. The growth was in line with the 4.8% rise in July and exceeded forecasts of 5.3%. In addition, crude oil prices rose, with WTI surpassing $100 per barrel for the first time since late May. As a result, according to the CME FedWatch Tool, the probability of a 25 basis point interest rate increase by the Federal Reserve in September rose to 70%, allowing the 10-year US Treasury bond yield to continue rising toward the 5% mark. According to analysts at Deutsche Bank, the story is similar to what has happened elsewhere, with expectations of possible interest rate hikes at the Fed's meeting next week. According to them, Treasury yields rose significantly, whereby the two-year yield shot up by 15.5 basis points to 4.59% - the highest in July 2024- and the 10-year yield by 12.2 basis points to 4.96%, the highest in October 2023. Importantly, analysts note this occurred during the latest US Producer Price Index (PPI) reading for August, when headline PPI rose 0.4%, and the previous July reading was revised from 0.0% to 0.1%. The key point, according to analysts at Deutsche Bank, is that the input components of the Personal Consumption Expenditures (PCE) price index came in higher than expected, so the Fed will definitely hike interest rates. On Friday, as oil prices fell, precious metals, including gold, found support and started moving higher heading into the weekend. In addition, the US Bureau of Labor Statistics reported no change in inflation in the USA, based on the year-on-year change in the Consumer Price Index (CPI) for August, which stood at 3.4%, the same as the previous month as expected. Core CPI inflation was 2.4% year-over-year, down from 2.5% the previous month. Silver prices have increased more than 1% today, but they are still trading below the neckline of the head-and-shoulders formation. This implies that in the short run, the general trend is likely to be downward. At present, XAG/USD is trading at $64.24 after bouncing back from its daily low of $62.94. The white metal is expected to trade sideways as it meets resistance around the neckline, in the $64.10 to $64.15 range, with bearish momentum still building. Silver shows a positive outlook for the day; however, momentum favors the bearish side, as the RSI holds below the 50 neutral level despite rising prices. If XAG/USD rises above the $65.00 mark, it may enable more upside movement towards the 100-day Simple Moving Average (SMA) of $66.94. The upward trend may drive price above the $67.00 threshold to test the $70.00 barrier; after that, the next significant resistance is the 200-day SMA, approximately $73.05. From the downside, Silver's immediate support is at $64.00. However, in case of more bearish activity, the price may drop to the 50-day SMA of $62.55 before testing the $61.01 level–the July 22 high, now turned into support. Below this level, the target is $60.00.