XAG/USD Pressured by Profit-taking, Fed Uncertainty

Overview

Silver (XAG/USD) prices are lower for the session, while hovering just above its lowest level since October 13, reached on Wednesday. The market is posting an inside move which typically indicates investor indecision and impending volatility. In this case, it could also be indicating a transition from bullish to bearish as speculators continue to erase the recently placed risk premium.

At 09:22 GMT, Silver (XAG/USD) is trading $22.47, down $0.65 or -0.29% and December Comex silver futures are at $22.54, down $0.19 or -0.83%.

Down on Profit-Taking

Silver prices are retreating as the threat of an escalation of the Middle East conflict eased, encouraging longs to book profits from their safe-haven buys. Additionally, U.S. traders awaited comments from Fed Chair Jerome Powell for more clues on the direction of U.S. interest rates.

Powell, FOMC Members Remain in Focus

Domestically, a group of Fed officials who spoke earlier in the week sustained a balance tone on the direction of Fed policy by noting that the Federal Open Market Committee (FOMC) would continue to focus on economic data such as consumer inflation (CPI) and labor, as well as the impact of higher long-term Treasury yields.

Fed Chair Powell is scheduled to speak on Thursday. Yesterday, Powell did not comment on monetary policy or the economic outlook, according to Reuters. In the meantime, silver traders believe that he will probably try to maintain the “higher-for-longer” narrative for interest rates that he emphasized at the Fed meeting a week ago. This essentially is telling the market that the Fed isn’t interested in talking about cutting rates yet although the market is pricing in the first rate cut for March 2024.

Short-Term Outlook

The short-term outlook from both a fundamental and technical perspective leans toward the bearish side.

Technical Analysis

Silver (XAG/USD) prices are drifting lower after hitting a wall of resistance recently at the 50-day moving average of 22.73 and the 200-day moving average at 23.26.  Both of these moving averages should continue to control the direction of the market as well as provide formidable resistance.

On the downside, the next key level to watch is 22.23. On the initial test, this level could act as support and produce a technical bounce. However, if it fails then look out to the downside.