- Silver is consolidating above $21.00 after reaching its lowest level since July 2020 at the $20.75 zone.
- Risk aversion flows and lower yields are not doing much to help XAG/USD which lost roughly 2.0%.
- Techs are eyeing more downside at levels below $20.00.
After briefly reaching its lowest level since July 2020 in the area of $20.75 per troy ounce, the price of silver (XAG/USD) it has stabilized just above the $21.00 level. That leaves the price of silver down about 2.0% on the session as the precious metals complex falters against the backdrop of a strong US dollar. With no notable support, all before the 2019 highs of $19.60, many technicians believe further declines in XAG/USD are likely.
Lower yields in developed markets as a result of strong safe haven supply as global stocks and other risky assets continue their recent slide has not helped silver, which is traditionally seen as a safe haven asset. Meanwhile, more evidence that US inflation is not falling as fast as expected in the form of the latest US Producer Price Inflation data released on Thursday, which comes on the back of Wednesday’s Consumer Price Inflation figures also higher than expected, has also not triggered any new demand for inflation protection that could normally benefit the precious metal.
Markets remain very focused on central bank tightening, with Fed members’ rhetoric this week very much in line with Fed Chairman Jerome Powell’s message at the FOMC post-meeting press conference last week. last week that substantial additional tightening should be expected. Higher interest rates not only discourage investors from allocating capital to silver and gold (given the higher opportunity cost of holding non-yielding assets), but are also likely to result in lower inflation. long-term (as a direct result of demand). relaxation due to tighter financial conditions), reducing the demand for protection against inflation.
The reduced demand for inflation protection as a result of the Fed’s hawkish shift in recent weeks can be seen in the recent pullback to multi-month lows in US inflation expectations. years hit 3.1% in mid-April, but are now back in the 2.75% area, and this pullback coincides with the recent drop in XAG/USD.
Technical levels
Source: Fx Street
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