XAG/USD declines sharply below the $18.50 level on aggressive Fed tightening
- Silver prices slipped nearly 2% on Tuesday on risk aversion.
- An improvement in consumer confidence alongside a rise in job vacancies would not prevent the Fed from raising rates.
- Most Fed officials are looking for a 50 or 75 basis point rate hike at the September meeting.
Silver prices are moving lower, hitting six-week lows below $18.50 and extending losses for three consecutive days amid sour market sentiment buoyed by expectations of a dovish Fed, according to Powell’s Jackson Hole speech . The same remarks are being repeated by members of the Governing Council, adding to a global chorus of hawks that higher interest rates and high inflation could trigger a recession.
XAG/USD hit a daily high near $18.84, but broad US dollar strength spurred by three regional Fed bank governors and renewed Covid-19 lockdowns in China weighed on the white metal. Hence, tXAG/USD tumbled towards the daily lows at $18.32 before settling around current prices. At the time of writing, XAG/USD is trading at $18.40, down almost 1.70%.
XAG/USD stumbles on positive US consumer confidence, sour sentiment
During the New York session, the US Conference Board announced that US consumer confidence was better than estimated. The August numbers came in at 103.2, beating expectations of 98. At the same time, the US Department of Labor reported that job openings in the JOLTs Openings Report rose by 11.2 million, beating all forecasts, while the number of layoffs has declined.
Apart from that, three Fed officials stressed the need for the US Federal Reserve to raise interest rates into hawkish territory. New York’s Fed Williams expressed the need to raise rates above the 3.5% threshold, adding that once rates have peaked, they will need to stay high for longer. Richmond’s Fed Barkin later stated that the Fed’s target is 2% and reiterated that the Fed will “do whatever it takes to achieve that target.”
Earlier, Atlanta-based Fed Bostic wrote that the Fed’s commitment to curbing inflation was “unwavering,” while adding that he was open to lower rate hikes.
On the ECB side, most Governing Council members, seven via newswires, expressed the need to bring forward interest rates, some expecting a rate hike of 75 basis points, others 50. Some of the speakers said that the euro zone was entering a recession.
Apart from that, market participants are focusing on the US economic calendar. The agenda will include the US ISM Manufacturing PMI for September along with the US Nonfarm Payrolls report which would shed some light on the employment situation.