Silver Price Analysis: XAG/USD dumps to $22.00 level amid technical selling, strong US macro data

Spot silver (XAG/USD) saw a pickup in volatility on Thursday, after a bout of technical selling sent it to its lowest level since early October under $22.00. Spot prices had been supported by an uptrend over the course of the last week and when that short-term uptrend was broken on Thursday, selling pressure increased. With XAG/USD now trading around the $22.00 level, its losses on the day stand at nearly 2.0%. Its losses on the week are closer to 2.5%, whilst its losses since the emergence of the Omicron variant back on November 26 are above 7.0%.

Unlike spot gold prices, FX and bond markets, which have been more rangebound this week ahead of Friday’s key US inflation numbers and ahead of next week’s central bank bonanza, silver prices have continued the recent bearish run. Silver has outperformed gold by a significant margin since mid-November when it topped out close to $25.50 at its 200-day moving average. Perhaps this rejection of the 200DMA have made things worse for the precious metal over the last few weeks.

In light of another very strong US labour market report, which showed weekly initial jobless claims falling to their lowest since 1969, and comes after JOLTs data showed job openings moving above 11M again at the end of October and official BLS data showing the unemployment rate dropping to 4.2% in November, downside makes sense.

The Fed is becoming increasingly attuned to just how tight the labour market is, and is very aware that inflation is currently running at more than three times its target. On that note, if the YoY rate of Consumer Price Inflation (expected to rise to 6.8% in November) is revealed to have surpassed 7.0% in November, that would add further selling pressure to precious metals like silver on expectations for a more hawkish Fed. The bears will be targetting a test of late-September lows around $21.50.