Silver Prices Dip Amid Rising Treasury Yields and Fed’s Hawkish Stance
Despite the dollar's weakness, spot silver prices faced a decline on Monday, approaching the crucial $29.00 per ounce mark. According to FXStreet analyst Christian Borjon Valencia, the technical outlook for silver indicates further potential weakness.
Valencia notes that the rise in US Treasury yields, driven by hawkish comments from Fed officials, has exerted downward pressure on silver prices. The first support level for silver is near the 50-day moving average at approximately $29.01 per ounce.
On Monday, spot silver closed down 0.28% at $29.45 per ounce, having dipped as low as $29.02 per ounce during the session. The 10-year US Treasury yields rose nearly 6 basis points to 4.281%.
Philadelphia Fed President Patrick Harker suggested that based on current forecasts, one rate cut this year might be appropriate, highlighting the likelihood of maintaining high rates. "If everything goes as expected, I think it would be appropriate to cut rates once before the end of the year. In fact, I think there is a good chance of two or zero rate cuts this year, depending on which way the data goes. So we will continue to rely on the data," Harker stated.
He now expects economic growth to slow but remain above trend, with modest increases in unemployment. Harker also emphasized that achieving the Fed's inflation target will be a "long process." Last week, Minneapolis Fed President Neel Kashkari mentioned that the Fed will wait until December to consider cutting interest rates.
Valencia writes that silver prices are neutral to negative after reaching an 11-year high of $32.51 per ounce. The prices are retreating towards the 50-day moving average, which serves as the first support level at $29.01 per ounce.
The trend has turned bearish, with the Relative Strength Index (RSI) below the mid-50s. If silver falls below the 50-day moving average, the next support levels are the 100-day moving average at $26.40 per ounce and the May 2 low of $26.02 per ounce.
On the upside, Valencia adds that if silver buyers maintain the $29.00 per ounce level, they will need to push past the $30.00 per ounce mark to retest the year-to-date high of $32.51 per ounce.
