XAG/USD fails to recover from $23.00 and targets $22.00 despite weak US GDP data

  • Silver saw only a very modest rebound from its lows of below $23.00 since mid-February after weak US GDP data.
  • As US yields rise and USD remains resilient, XAG/USD remains at risk of hitting previous 2022 lows of $22.00.

Spot Silver (XAG/USD) recovered only marginally from its lowest levels since mid-February below $23.00 after data showed a surprise fall in US first quarter GDP, with the US dollar retreating from its highs . But a more significant recovery does not appear to be imminent, as XAG/USD is still trading just above the $23.00 level for now, still suffering losses of around 1.0% on the day.

The US Dollar has been on an upward trend for the past few days, with the US Dollar Index (DXY) hitting a five-year high above 103.00 this week and approaching 104.00 earlier on Thursday amid concerns over geopolitics, global growth and expectations of aggressive Fed tightening. This has weighed heavily on the precious metals complex as both silver and gold have been tarnished.

Indeed, XAG/USD is trading at current levels near $23.00 with weekly losses nearly 5.0% and almost 12% off last week’s highs above $26.00. Some analysts may be interpreting the latest US GDP figure as reducing the likelihood of the Fed signaling another radical shift in its interest rate forecast towards hard-cut rates (ie above the neutral 2.5% level) in the coming months .

But right now, markets don’t seem to be reading things that way. US yields continue to push higher and the dollar is likely to remain buoyant, perhaps given the latest Q1 inflation readings, released alongside GDP growth numbers, showed a further rise. XAG/USD remains vulnerable to a retest of yearly lows around $22.00 and a return to 4Q21 lows mid-$21.00.

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