XAG/USD is underpinned by falling Buck/US yields but is yet to reclaim $25.00

  • A continued pullback in the US dollar and yields off recent highs are buoying precious metals.
  • XAG/USD is now more than 4.0% higher from Tuesday’s lows below $24.00 but failed to reclaim the $25.00 level.
  • Easing geopolitical risk premiums and caution over key US data are holding silver bulls off for now.

Although recent US data (strong ADP and robust Q4 GDP and core PCE numbers) coupled with fresh hawkish comments were interpreted by Fed policymakers as lowering expectations for a 50% rate hike by the bank Firming basis points in May, the US dollar continues to do so coming under heavy selling pressure and supporting the precious metals complex. US yields also continue to decline from recent highs, with the US 10-year rate slipping back below the 2.40% mark on Wednesday, part of the recent upward pressure on the “opportunity cost” of holding non-profitable assets how precious metals mined.

Silver (XAG/USD) spot prices are therefore trading about 0.75% higher on the day but failed to sustain a sustained push north of the $25.00 a troy ounce. Still, XAG/USD is trading at the current level at $24.90 with gains of more than 4.0% from Tuesday’s lows just below $24.00. Traders flocked to buy silver at the time as it tested its 200-day moving average at $23.96. A successful defense of support at the key $24.00 area will have many bulls eyeing a retest of last week’s highs of $25.80.

But the recent shift in tone in the Russian-Ukrainian peace talks toward greater optimism that a peace deal can be struck means that geopolitical risk premiums, a key driver of silver prices in March, have eased somewhat. Meanwhile, key US core PCE and official jobs data will be released over the next two days before it is not uncommon for precious metals, forex and bond traders to exercise a greater degree of caution and more muted trading conditions. Perhaps it’s not too much of a surprise then that XAG/USD failed in its attempts to climb back above $25.00 on Wednesday.

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