- Silver is trading lower for the fourth consecutive session as risk appetite recovers and yields rise.
- XAG/USD bears are likely to be on the lookout for a test of the 50-200 DMA near $24.00 with an aggressive surprise from the Fed.
Weaker-than-expected US retail sales figures for February failed to provide a boost to the precious metals complex on Wednesday, with silver (XAG/USD) prices trading in the red for the fourth consecutive session. Risk appetite has been recovering on Wednesday, with global equities firmly in the lead amid a more constructive tone in Russian-Ukrainian rhetoric (although the fighting in Ukraine shows no signs of abating), and as equity prices energy and other raw materials decrease.
XAG/USD failed in an earlier attempt to break above the $25.00 per troy ounce level and has since dropped back to the $24.80 area, where it is trading down roughly 0.3% on the session, despite the weakness of the US dollar. Much attention has been paid to the sharp rise in US bond yields in recent days, which has coincided with silver’s recent sharp pullback from its recent highs of $26.00. Rising yields reduce the appeal of holding non-yielding assets like precious metals.
Silver continues to trade above its weekly lows of $24.50 hit on Tuesday and appears to have entered its typical pre-FOMC holding mode. The central bank is expected to raise interest rates by 25 bps. The market’s main focus will be on the new economic forecasts and the bank’s dot chart, as well as Fed Chairman Jerome Powell’s tone at the press conference. Investors are keen to gauge the extent to which Powell will be willing to continue tightening policy to control inflation, even as growth slows as a result of recent geopolitical events.
Given the above comments, analysts lean towards Powell choosing to control inflation at the expense of growth, rather than choosing to support growth at the expense of inflation, which means aggressive risk taking. With XAG/USD now below its 21-day moving average near $24.90, some short-term bearish speculators will watch if prices can fall back to the 50 and 200 DMAs in the $24.00 area in the coming days. .
Additional technical levels
Source: Fx Street
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