- XAG Silver has been under selling pressure in recent trading and is looking to break below last week’s lows around $24.50.
- Stocks are rallying, undermining silver’s safe-haven appeal, and yields are up, increasing silver’s “opportunity cost.”
Silver prices (XAG/USD) they have been under selling pressure in recent trade and are currently trading at session lows, with the bears awaiting a test of last week’s lows at $24.50. Despite the lack of any new positive developments regarding the Russo-Ukrainian conflict (still no perceptible progress in the peace talks) and despite the Fed’s recent aggressive stance, risk appetite is strong and equities global markets are firmly in the lead, weighing on demand for safe havens like silver. Some recent headlines alleging there is a behind-the-scenes push within the Democratic party to revive Biden’s failed Build Back Better fiscal stimulus package could be helping risk appetite.
Either way, US (and global) yields are also rising sharply along with US (and global) equities, increasing the opportunity cost of holding non-yielding assets like silver. The 10-year US Treasury bond yield, for example, is approaching 2.40% for the first time since May 2019, rising more than 6 bps on the day and taking the month’s gains to the date to more than 50 bp. This sharp rise is largely the result of the Fed’s recent aggressive shift toward signaling 1) The Fed will move faster and 2) The Fed will raise rates above so-called “neutral” (2.0-2.5%) .
If the toxic mix of rallying stocks and bond yields continues to undermine demand for precious metals, things could turn ugly for XAG/USD. With the pair already trading down over 2.0% on the day from previous session highs closer to $25.50, a break below $24.50 could open the door for a drop towards the 200 and 50 moving averages. days in the area of $24.00. Going forward, apart from geopolitics, statements from various Fed members will be the main focus in the coming days, with Fed Chairman Jerome Powell scheduled to speak on Wednesday.
Additional technical levels
Source: Fx Street
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