Silver Price Analysis: XAG/USD breaks above $24.00 on weak PMI and declining US yields.

• Silver price tops $24.00 after S&P Global reported weak preliminary PMI data for August.
• The weak PMI numbers demonstrate the consequences of the Fed’s tight monetary policy.
• Silver price breaks above the 61.8% retracement of the Fibonacci level at $24.00.

The price of the Silver (XAG/USD) rises above $24.00 as the US dollar comes under pressure after S&P Global reported a weak preliminary PMI for August. The flash manufacturing PMI for August came in at 47.0, below expectations of 49.3 and the July reading of 49.0. Likewise, the services PMI remained below, at 51.0, against estimates of 52.2 and the previous publication of 52.3.

The weak PMI numbers demonstrate the consequences of the Federal Reserve’s (Fed) tight monetary policy. The US central bank has aggressively raised interest rates to 5.25-5.50% in a war against stubborn inflation. Price pressure has eased significantly to 3%, but investors expect above-target inflation to be extremely persistent.

The Dollar Index falls steeply to near 103.50 after hitting a fresh 10-week high of 104.00 as vulnerabilities in economic activity could force the Fed to hold interest rates. In addition, the 10-year US Treasury yield fell sharply to around 4.23%.

Looking ahead, investors will focus on Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium, which begins on Thursday. Jerome Powell is likely to communicate how long interest rates will stay high. Other than that, the outlook for the economy and inflation will be closely watched.

XAG Technical Analysis

Silver price breaks past the 61.8% Fibonacci retracement (plotted from the Jul 20 high of $25.27 to the Aug 15 low of $22.23) at $24.00 on a two-hour scale. The rising 20 period EMA at $23.00 indicates that the short-term trend is extremely bullish.

The Relative Strength Index (RSI) (14) sits in the bullish range of 60.00-80.00, indicating more bulls ahead.

XAG 2-hour chart