XAG/USD Vulnerable Amid Hawkish Fed Rate Stance

Silver Prices Under Pressure

Silver (XAG/USD) is poised for a weekly loss, influenced by a strong U.S. dollar, rising Treasury yields, and weakened gold prices following Federal Reserve Chair Jerome Powell’s hawkish statements. Spot silver is testing lows not seen since mid-October, struggling below the $24.00 mark and seeming vulnerable with a downside target near $23.25.

Fed’s Hawkish Stance Impacts Markets

Powell’s comments have cast doubt on the peak of U.S. interest rates, suggesting that current levels may not suffice to curb inflation. This uncertainty, coupled with the Fed’s decision to keep rates steady with the possibility of future hikes, has left investors pondering the duration of high rates and the potential for a U.S. recession.

Treasury Yields Rise, Affecting Bullion

Following these remarks, the benchmark 10-year U.S. Treasury yield surged, diminishing the allure of non-yielding assets like silver. The rise in Treasury yields, particularly the 10-year, 2-year, and 30-year bonds, reflects a shift in investor sentiment, as evidenced by weaker demand at a recent Treasury bond auction.

Short-Term Forecast

The dollar index is on track for its biggest gain in two months, further pressuring silver prices by making it more expensive for holders of other currencies. The anticipation of ongoing rate hikes and a higher opportunity cost for holding non-interest-bearing silver contribute to a bearish short-term outlook for the metal.

Technical Analysis

The current daily price of silver (XAG/USD) at 22.58 is trading below both the 200-day and 50-day moving averages, set at 23.25 and 22.70 respectively. This positioning indicates a bearish trend, as the price is below key long-term and medium-term benchmarks.

Additionally, the price is hovering just above the minor support level of 22.23, suggesting a delicate balance and potential vulnerability to further declines. The proximity to this support level underscores a critical threshold for the asset.

Furthermore, with the current price significantly below the minor resistance of 23.55 and even farther from the main resistance at 24.50, there is considerable room for upward movement before encountering major resistance. To put it another way, bearish traders seem to be driving the market away from resistance and toward support where the market is most vulnerable.

This overall picture, with the price below both moving averages and near minor support, paints a bearish sentiment in the short-term market outlook for silver.