XAG/USD remains muted at a low $24.00 on broader recovery in risk appetite
- Silver prices traded subdued on Friday as a sharp rise in risk appetite dampened safe-haven demand.
- Spot prices remained subdued in the low $24.00 area with the $24.50 level serving as a ceiling.
- As the war in Ukraine rages on and the Western sanctions response to Russia evolves, uncertainty remains high.
A surge in risk appetite that has seen US stocks return to highs this week and risk-sensitive currencies to perform well weighs heavily on safe-haven assets such as precious metals, government bonds and the US dollar and yen. Hopes of a diplomatic opportunity between Russia and Ukraine that could end the war as it has just begun are a factor fueling the better mood. The West’s “soft” sanctions response to Russia (so far), which has avoided hitting the country’s energy sector, is another. Spot silver (XAG/USD) unsurprisingly struggled to make any headway on the last trading day of the week, with the $24.50 level serving as a ceiling for price action.
From current levels around $24.10, silver prices are down about 0.5% on the day and nearly 6.0% off Thursday’s highs above $25.50. Whether silver’s recent geopolitical tension-fuelled rally (XAG/USD is still up more than 7.0% on the month) continues to pull some fresh air will depend on headlines. If talk of Moscow-Kiev talks that could lead to an early end to the war continues to gain momentum, it could be a negative catalyst, sending the spot price back below $24.00.
Alternatively, momentum appears to be building with Western nations kicking Russia out of the international SWIFT payment system, which could reignite some fears of economic disruption. If momentum towards energy sanctions also builds, economic uncertainty and demand for inflation protection could easily lift XAG/USD back above its 200-day moving average at $24.20 and into the upper $24.00. Traders should stay on their toes. Depending on developments over the weekend, things could be quite aggressive either way next Monday.