- Silver trims some of its weekly losses but remains down 1%.
- Risk aversion underpins the unprofitable metal, along with the dollar
- Positive economic data from the US keeps the USD tilted higher.
- Fed officials expect rate hikes of 50 basis points in June and July.
- Silver Price Forecast (XAG/USD): Slanted to the downside, though a break above $22.44 would open the door towards the 50-DMA.
Silver (XAG/USD) It breaks two days of losses and rises above 1.50% on the day in the middle of a risk-off session, courtesy of growing concerns that tight monetary policies threaten to push the US economy into a recession. At $21.86, XAG/USD is bouncing off weekly lows around $21.43 as XAG bulls prepare to retest the $22.00 level.
White metal prices are rising, despite rising US Treasury yields. The US 10-year yield is up almost ten basis points to 2,949%, failing to undermine precious metals. However, global equities fell, attributed to rising global bond yields.
Sentiment remains gloomy courtesy of increased hostilities in the Ukraine-Russia war. The Russian military advanced on an industrial city, according to Reuters. Meanwhile, the US is preparing to send more military equipment to Ukraine.
Meanwhile, the USD continues its recovery during the New York session. The dollar index, which measures the value of the dollar against a basket of six currencies, is up 0.77% at 102,557, a level last seen on May 23.
In terms of data, the US economic docket was heavily loaded with the May ISM Manufacturing PMI, JOLT openings and some Fed speakers. The ISM Manufacturing PMI came in at 56.1 vs 55.4 in April, while expectations hovered around 54.5. Meanwhile, the US JOLTs report showed April openings fell from 11.9 million in March to 11.4 million, a relief for employers struggling to hire or keep workers.
St. Louis Fed President James Bullard said “the current macroeconomic situation in the US is testing the credibility of the Fed with respect to its inflation target.” In addition, he added that the US economy and labor markets remain robust, but Russia’s invasion of Ukraine and China’s sharp slowdown mean the risk remains “substantial.”
Earlier in the day, San Francisco Fed President Mary Daly said she sees a couple of 50 basis point rate hikes and underscored the need for the Fed to move quickly to neutrality. She added that the central bank has to be prepared to do whatever it takes to control inflation, although it has to be prepared to stop raising rates if necessary.
Silver (XAG/USD) Price Forecast: Technical Outlook
XAG/USD remains sloping lower, which is confirmed by the daily moving averages (DMA), which reside above the spot price. If the XAG/USD bulls wanted to regain control, they would need a break above the May 27 high of $22.46. Once broken, this could pave the way for a test of the 50 DMA at $23.38. Otherwise, XAG/USD would remain vulnerable to further selling pressure as sellers look for rallies to enter at a better price. In that case, the first support for XAG/USD would be the June 1 low at $21.43. A break below would expose the low of May 19 at $21.28, followed by the low of the year at $20.45.
Technical levels
Source: Fx Street
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