Silver Price Analysis: XAG/USD subdued near $24.50 pre-Fed minutes release as bears eye $24.00 support zone

  • Silver has rebounded from one-week lows at $24.12 to near $24.50 as markets await the Fed meeting minutes release.
  • Rising US yields and USD strength have weighed recently, though geopolitics remains a source of support.
  • Dips towards $24.00 may thus be subject to being bought into.

Spot silver (XAG/USD), whilst continuing to trend gradually to the downside as US yields and the US dollar continues to advance ahead of the release of the minutes of the last Fed meeting, has rebounded in recent trade. Spot prices hit fresh one-week lows at $24.12 per troy ounce earlier in the session but have since rebounded back towards $24.50 where they now trade with gains of about 0.6% on the day. That means XAG/USD has recovered back above its 50-Day Moving Average in the $24.30s, a level that has been offering support over the past three sessions.

But against the backdrop of further hawkishness from Fed policymakers in recent days ahead of what is likely to be very hawkish-sounding Fed minutes release at 1900BST, the risks remain tilted towards higher US yields and a stronger US dollar. Given silver’s negative correlation to both of these, that suggests a continued steady grind lower towards $24.00 is more likely than not. Silver bears will thus be eyeing a test of recent lows just under $24.00, which also happen to coincide with the 200DMA.

Was it not for the high level of geopolitical risk premia priced into precious metals markets, plus ongoing demand for inflation protection and investors mull the inflationary impact of the Russo-Ukraine war, XAG/USD would likely be significantly lower. Whilst Fed hawkishness, rising yields and the risk of a stronger US dollar are all negative for silver, it would be brave to call for silver to drop all the way back to annual lows in the $22.00 area.

The US and UK both toughened financial sanctions on Russia on Wednesday, while the EU is in the process of passing sanctions on imports of Russian commodities, including coal and oil. Meanwhile, there have not been any fresh indications recently that a Russo-Ukraine peace deal might be near, and Russia shows no signs of wanting to end its invasion of Ukraine. As a result, dips towards $24.00 may be bought into in the short term.

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