Silver gains ground amid upcoming inflation reports

The price of silver is trading moderately higher on Monday as investors are cautiously awaiting a key U.S. inflation report. This statistic could clarify the Federal Reserve's (Fed) next steps regarding interest rates.

Economists polled by Reuters expect Wednesday's U.S. Consumer Price Index (CPI) data to show a 0.2% month-over-month increase in both the headline and core inflation rates.

In addition, Thursday's U.S. retail sales data may influence expectations for the Fed's future policy.

According to the CME FedWatch tool, the market is pricing in a 54% probability of a 50 basis point rate cut at the Fed's September meeting. In a low interest rate environment, the appeal of the precious metal as a non-income producing asset tends to increase.

On Saturday, Fed Governor Michelle Bowman softened her typically hawkish tone, noting progress in the fight against inflation. However, she noted that inflation is still elevated.

The gold-to-silver ratio has reached a significant area of resistance, indicating that a bottom in silver is approaching. The gold-to-silver ratio is a key indicator of the relative value between gold and silver, with peaks in this ratio signaling that silver is undervalued compared to gold.

In terms of technical analysis, silver prices are in a downward corrective trend on the H4 timeframe. However, the fundamental factors and the Bulls Power and Bears Power indicators (standard values), which are in the positive zone, confirm the strength of the bullish sentiment and the formation of the buying movement.

Signal:

Short-term prospects for silver suggest buying. 

The target is at the level of 30.000.

Part of the profit should be taken near the level of 28.650.

A stop-loss could be placed at the level of 25.900.

The bullish trend is short-term, so trade volume should not exceed 2% of your balance.