XAG/USD falls back to probe the $25.00 area as US stock/bond yields rally

• Silver spot prices fell back and tested the $25.00 level on Wednesday as US stock markets/bond yields rallied.
• A reassuring message from Fed Chair Powell that the Fed plans to proceed cautiously with tightening helped sentiment.

Spot Silver (XAG/USD) prices were sharply lower on Wednesday as risk sentiment turns for the better and global bond yields signal a return from Tuesday’s outsized drop. XAG/USD retreated from Tuesday’s highs above $25.50 a troy ounce to probe the $25.00 level. At one point, the precious metal fell as low as $24.80, where it was trading more than 2.0% lower at the time, but has since recovered to the $25.15 area and is now down just under 1.0% .

US stocks hit their highest level since mid-February when Fed Chair Jerome Powell delivered a reassuring message on the first day of his semi-annual hearing before Congress that undermined demand for safe-haven precious metals. Powell said the Fed would move forward with prior guidance to begin a cycle of rate hikes in March, reiterating that the Fed will respond flexibly to the evolving outlook.

He also noted that the Russo-Ukrainian war has created significant uncertainty, and his dovish tone seemed to reassure investors that the US economy remains in stable hands with Powell at the helm of the Fed. With US stocks now pushing higher than they were before the Ukraine war started and US bond yields having staged a decent rebound (10s are down 1.85% after falling below 1.70% on Tuesday), it’s going to be silver for silver getting tougher. Test last week’s highs at $25.60.

XAG/USD, like other asset classes, is likely to remain choppy in geopolitical headlines over the coming days given the ongoing fighting in Ukraine. Much emphasis is likely to be placed on talks between a Russian-Ukrainian delegation, which the Russians teased could lead to a ceasefire (although this is far from the market‘s baseline scenario). Otherwise, the second day of Powell’s testimony on Thursday and more US data in the form of the ISM Services PMI on Thursday and the official jobs report on Friday will also be on traders’ radars.