XAG/USD is back below $24.50 after failing to break above the 200 DMA on Thursday

• Silver has dipped back below $24.50 on Friday despite a sharp drop in US government bond yields amid safe haven demand.
• XAG/USD appears to be suffering from some profit taking ahead of the weekend after failing to break above its 200 DMA on Thursday.

Despite a sharp drop in US bond yields on Friday amid increased demand for safe-haven assets as global equities fall, silver prices (XAG / USD) they have been able to advance again to challenge the weekly highs in the $24.70 zone. In fact, prices have actually reversed lower from Thursday’s highs and are currently trading about 0.3% lower on the day at $24.30. Generally, the combination of lower US bond yields (which reduces the opportunity cost of holding non-yielding silver) and risk aversion flows would benefit precious metals as a safe haven.

But XAG/USD, still trading up over 6.0% on the week, appears to be suffering from some profit-taking ahead of the weekend after the pair on Thursday failed to break above its 200-day moving average at 24.63. $. Ultimately, this failure could prove very costly. The last two times silver prices tested the 200 DMA (in August and then again in November), prices failed to break above it and eventually fell as much as 15% in the weeks after.

With the Fed meeting next week expected to green light an aggressive pace of monetary tightening in 2022, the scope for US bond yields and the US dollar to rise again is high. This could weigh heavily on precious metals. Arguably one factor that has been supporting prices this week has been rising geopolitical tensions in Eastern Europe with Russia apparently poised to invade Ukraine. Any signs that a military incursion is underway or imminent may push safe-haven assets like silver further next week, which could be enough to shield you from Fed-related bearish vibrations.

Technical levels