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

  • Spot silver prices fell to test the $25.00 level on Wednesday as US stock markets and bond yields rallied.
  • A reassuring message from Fed Chairman Powell that the Fed plans to continue tightening cautiously helped sentiment.

Silver spot prices (XAG/USD) fell sharply on Wednesday as risk appetite improves and global bond yields rebound from Tuesday’s outsized decline. XAG/USD retreated from Tuesday’s highs above $25.50 per troy ounce to probe the $25.00 level. At one point, the precious metal fell as low as $24.80, where it was trading at the time over 2.0%, but has since recovered to the $25.15 area to now trading just under 1.0%.

US stocks were able to hit their highest levels since mid-February as Fed Chairman Jerome Powell delivered a reassuring message on the first day of his semi-annual testimony to Congress, undermining demand for safe-haven precious metals. Powell said the Fed will move forward with advance indications to begin a rate hike cycle in March and reiterated that the Fed will respond with agility to changing outlooks.

He also noted that the Russian-Ukrainian war has added considerable uncertainty, and his measured tone seemed to reassure investors that the US economy remains in good hands with Powell at the helm of the Fed. With US stocks now pressing higher than their pre-war levels in Ukraine and US bond yields having recorded a decent rebound (the 10s are back at 1.85% after dipping below 1.70% on Tuesday ), this will make it harder for silver to test last week’s highs in the $25.60s.

XAG/USD, as is also the case with other asset classes, is likely to remain choppy on geopolitical headlines in the coming days as fighting in Ukraine continues. There will likely be a lot of attention on talks between a Russian and Ukrainian delegation that the Russians believe could lead to a ceasefire (although that’s really not the market’s base case). Otherwise, day two of Powell’s testimony on Thursday and other 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.

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