- Silver is back below the $22.50 level and on course for a tenth day of losses as the Fed threatens.
- Traders expect a test of yearly lows near $22.00 if the central bank delivers a hawkish surprise.
Spot Silver (XAG/USD) prices continue to trade on the downside ahead of the Fed’s key monetary policy announcement on Wednesday and as US traders at their desks after falling back below $22.50 a troy ounce arrived, see them on track to post a tenth consecutive session in the red. At current levels around $22.30, silver is trading down just over 1.0% on the day and has stretched its losses to almost 15% since mid-April, when the precious metal temporarily topped $26.00. The disappointing March US trade balance and April ISM Service PMI data had no impact on prices.
The Fed is expected to hike rates by 50 basis points, although there is some speculation that it could hike rates by 75 basis points and is expected to signal rates of around 2.5% by year-end ( which a series of rate hikes of more than 25 bps per meeting are likely). Should Fed Chair Jerome Powell hint at the likelihood of a higher terminal rate at the post-meeting press conference, markets could see a hawkish reaction that could put even more pressure on silver prices.
XAG/USD bears are eyeing a test of support in the form of the 2022 lows in the $22.00 area, a break below would open the door for a pullback towards the mid-$21.00 Q4 2021 lows . While the Fed doesn’t deliver a hawkish surprise, concerns over geopolitics as the EU moves closer to a blanket ban on Russian oil imports and ongoing concerns over Chinese growth amid ongoing lockdowns in Beijing and Shanghai suggest the dollar may be weak for the foreseeable future will remain robust future. That alone might be enough to force XAG/USD lower to test the key support in the coming weeks.
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