- Spot silver prices consolidate in the $23.00 area Monday in subdued, holiday-thinned trade.
- The main focus for precious metals is the reopening of US bond markets on Tuesday.
- If the US dollar rallies this week as many FX strategists suspect, it could be another headwind for XAG/USD.
Spot Silver (XAG/USD) prices consolidate in the subdued North American holiday zone around the $23.00 range on Monday as US markets close for the MLK day. This leaves spot prices roughly in the middle of last Friday’s $22.80-$23.30 trading range, with prices still heavily sandwiched between support and resistance in the form of the 50-day moving average at $23.20-$23.20. Dollar and the 21-day moving average is sandwiched at $23.20 at $22.77. Given the lack of trading volume at the moment, these ranges are very unlikely to be breached ahead of Tuesday’s upcoming Asia-Pacific session.
The main focus for precious metals will be the reopening of US bond markets on Tuesday, after the implied yield on US 10-year note futures was reportedly as high as 1.86% on Monday. 10-year yields rebounded above 1.80% last Friday to close at multi-year highs and if Monday’s move is repeated on Tuesday it would mark the highest level since January 2020. Last Friday’s move higher was driven by a rally in underlying real yields, with 10-year TIPS hitting their highest since the start of Q2 2021 at over -0.70%.
Higher real yields are reducing the attractiveness of non-yielding precious metals and if real yields continue to rise this week, XAG/USD could potentially take a hit as traders price in a hawkish Fed meeting ahead next week. $22.60 has been a key equilibrium area for the past few months and would be a key support level to watch. Below that, $22.00 is the next key support area to watch. The potential headwinds for silver this week could be amplified if, as many FX strategists have predicted, the US dollar starts to gain some ground this week after suffering pressure from overfilled long positions last week has.
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