Silver Price Analysis: XAG/USD Reverses Course in Response to Fed’s Barkin’s Dovish Line Stance

• XAG/USD is hovering around the $25.00 level after pulling back from May highs around $25.25.
• The Fed’s Barkin’s hawkish words caused US yields to recover somewhat. Even so, they remain at multi-month lows.
• All eyes are on Thursday’s October US PCE numbers.

At Wednesday’s session, the Silver XAG/USD trimmed daily gains, stabilizing at $25.00 after hitting a multi-month high of $25.25 earlier in the session. The pullback was largely influenced by Federal Reserve (Fed) Chairman Thomas Barkin’s hawkish words, which appear to have spooked markets. Markets’ attention remains focused on the October core Personal Consumption Expenditure (PCE) figures, which will be published on Thursday.

Along these lines, Barkin stated that he does not rule out the possibility of another interest rate hike and remains skeptical about achieving the target inflation rate of 2%. He also mentioned that inflation will be more tenacious than expected, which seems to limit expectations after the latest US Consumer Price Index (CPI), which had markets betting that the Fed was nearing the end of its hardening cycle.

Meanwhile, US government bond yields erased some losses but remain weak. The 2-year Treasury yield is at 4.65%, its lowest since July, and the 5-year and 10-year yields are at 4.21% and 4.27%, respectively, their lowest levels. since September. That said, as long as US yields continue to decline, the gray metal could continue to rise. In Thursday’s session, the US will report October PCE numbers, the Fed’s preferred inflation gauge, which may impact bond markets as they will shape expectations for the Fed’s next steps.

XAG/USD levels to watch

Daily chart indicators offer a positive outlook for metals, but a correction may be on the way. On the one hand, the position of the Relative Strength Index (RSI), which indicates overbought conditions and appears to be flattening, suggests that selling pressure could soon increase as market temperatures cool from elevated levels. This is in line with the recent behavior of the bulls, who appear to be taking a breather after taking the currency pair to highs since early May.

On the other hand, the moving average convergence divergence (MACD), with its green upward bars, points to increasing buying momentum. This indicates that there is strong bullish sentiment at play, raising the bullish pressure. This perception is also supported by the pair’s positioning above the simple moving averages (SMAs), more specifically the 20-day, 100-day, and 200-day SMAs.

Support Levels: $24.90, $24.50, $24.30.
Resistance Levels: $25.50, $25.70, $26.00.

XAG/USD daily chart