XAG/USD craters as real yields flirt with positive territory

SILVER PRICE PROSPECTS:

• Silver prices plummet above 2.8th% to $24.50 as bond yields continue to rise
• Real interest rates are also getting higher, flirting with positive territory for the first time since 2020
• This article looks at the key technical layers for XAG/USD to be considered in the next few days

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Silver (XAG/USD) fell sharply on Thursday, down 2.8% to $24.50, following a similar but less pronounced move in gold. carried away by rising yields, with US 10-year Treasuries up to 2.94%, near multi-year highs set earlier this week. However, the most damaging blow to precious metals is not what happens to face values prices, but at real prices. In this context, it is important to emphasize that the 10-year Treasury Inflation-Protected Security (TIPS), a good indicator of real interest rates, will turn positive for the first time since 2020 (see chart below).

Source: CNBC

As the Federal Reserve advances its plans for aggressive monetary policy normalization and CPI observedalong with inflation expectations, starts to Reject, Real interest rates will drift higherweigh Assets that don’t produce income, like silver. Another headwind for this metal, which has numerous industrial uses, is the slowdown in economic activity. although it is long-term perspective remains bullish on the clean energy revolution, demand may weaken in the near term as growth falters. An important one at this point Economic crisis is not the baseline scenario, but it is a threat worth keeping an eye on as it could have detrimental effects on commodities.

The balance of risk for precious metals tends to be on the downside towards weakness in the coming months rising real yields and a stronger US dollar, the situation could change quickly if geopolitical tensions over the war in Ukraine escalate. Gold and silver are also acting as safe havens, so their prices could rise if the military conflict in Eastern Europe spirals out of control and panics the financial markets. However, traders should follow developments in the region to better assess the outlook both XAG/USD and XAU/USD.

Turning to technical analysis, the silver price has fallen below its 50-day moving average after a sharp decline this week and is now attempting to break below a key support near $24.50. If that floor is decisively overruled with a weekly close below, the metal could accelerate its decline and head for $24.18, the 50% Fibonacci retracement of the December 2021/March 2022 rally. Further weakness shifts the focus to the 200-day SMA, followed by $23.53. On the other hand, if the buyers come back and regain control of the market, initial resistance appears at $24.85 and then $25.40.

SILVER PRIZE TECHNICAL CHART

Silver price chart created with TradingView

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— Written by Diego Colman, contributor