- XAG Silver continued to rise on Tuesday, at one point near $27.00 before falling back below $26.50.
- As commodity markets continue to rally broadly, silver is likely to retain healthy demand related to inflation hedging.
The rise of silver (XAG/USD) accelerated on Tuesday, with the precious metal up more than 3.0% on the day, taking its streak of gains since the beginning of the month to more than 8.0%. The prices of XAG/USD they were close to hitting the $27.00 per troy ounce level and in doing so reached their highest point since mid-June 2021. The US announced a ban on Russian energy imports and the UK announced a plan to phase out Russia’s oil imports by the end of the year, further triggering fears of Western sanctions-induced global stagflation and supporting precious metals.
Gold came close to hitting record highs in the area of ​​$2075 per troy ounce on Tuesday. With spot silver still holding 12% below its all-time highs from early 2021, there may be some room to catch up. The next major area for bulls to watch is the 2021Q2 highs in the $28.70 zone, 8.0% above current levels. With no end in sight to the fighting in Ukraine and Western sanctions on Russia likely to continue to tighten in the coming days and weeks, it remains premature to say that the overall commodity market rally has peaked.
Therefore, silver and other precious metals are likely to continue to receive healthy demand as inflation hedges and safe haven assets. Thursday’s US consumer price inflation (CPI) metrics should serve as a timely reminder of just how far behind the curve the Fed is when it comes to tackling inflation (interest rates are just above from zero and the general CPI is close to 8.0% year-on-year). With monthly inflation rates expected to rise in the coming months to reflect recent commodity price action, real interest rates in major developed countries are not expected to rise anytime soon, it should maintain a strong incentive to hold non-yielding assets like silver.
Additional technical levels
Source: Fx Street
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