Silver Price Analysis: XAG/USD dips under $22.50, eyes annual lows around $22.00 as Fed looms

• Silver is back under the $22.50 level and on course for a tenth day of losses as the Fed looms.
• Traders are eyeing a test of annual lows near $22.00 if the central bank delivers a hawkish surprise.

Spot silver (XAG/USD) prices continue to trade with a negative bias in the run-up to Wednesday’s key Fed policy announcement and, after dipping back below the $22.50 per troy ounce mark as US traders arrived at their desks, look on course to post a tenth consecutive session in the red. At current levels around the $22.30 mark, silver is trading with on the day losses of a little more than 1.0%, taking its losses since mid-April, when the precious metal momentarily surpassed $26.00, to nearly 15%. Disappointing US March Trade Balance and April ISM Service PMI data didn’t have an impact on prices.

The Fed is expected to implement a 50 bps rate hike, though there is some speculation they may go with a 75 bps move, and is expected to signal rates reaching around 2.5% by the year’s end (meaning a series of rate moves of larger than 25 bps per meeting are likely). Should Fed Chair Jerome Powell hint at the likelihood of a higher terminal rate in the post-meeting press conference, markets could see a hawkish reaction, which could put silver prices under yet further pressure.

XAG/USD bears are eyeing a test of support in the form of the 2022 lows in the $22.00 area, a break below which would open the door to a drop towards Q4 2021 lows in the mid-$21.00s. Even if the Fed doesn’t deliver a hawkish surprise, concerns about geopolitics as the EU nears a blanket ban on Russian oil imports and continued concerns about Chinese growth amid ongoing lockdowns in Beijing and Shanghai suggest the buck is set to remain robust for the foreseeable future. That alone could be enough to force XAG/USD lower to test key support in the weeks ahead.