Silver Price Analysis: XAG/USD flatlines in mid-$24.00s despite rising US yields

Spot silver (XAG/USD) prices have flatlined near their 50-Day Moving Average at $24.40 on Thursday, as the ongoing focus on the Russo-Ukraine war and related developments takes the spotlight and distracts from the ongoing shift higher in US yields. The 50DMA has been acting like a magnet for the past two sessions, with XAG/USD traders seemingly happy to keep the precious metal trading in the mid-$24.00s per troy ounce, rather than pushing it towards the 21DMA at $25.00 or the 200DMA just below $24.00. Both of these levels have in recent weeks offered support and resistance.

Silver’s resilience in the face of the ongoing push higher in yields across the US treasury curve, which continues to be spurred by hawkish Fed rhetoric (and Wednesday’s hawkish minutes), has surprised some. Fed uber hawk James Bullard even went as far as calling for rates to hit 3.5% by the end of 2022. Normally moves higher in bond yields and the idea of higher rates weighs on precious metals given the increased “opportunity cost” of holding non-yielding precious metals.

Some market commentators have suggested that demand for inflation protection ahead of the release of US Consumer Price Inflation figures for March next week could be at play. The preliminary estimate of Eurozone inflation in March showed a big jump to even higher levels beyond the ECB’s target and expectations are for next week’s US inflation figures to show the same. While silver certainly remains vulnerable to higher interest rates, given elevated inflation, real rates remain deeply negative.

Given the war in Ukraine putting downwards pressure on already highly negative near-term real rates, it perhaps shouldn’t come as a surprise to see XAG/USD remain resilient in the $24.00s. For now, as markets await further major macro updates, it would make sense to see silver continue ranging within $24.00 to $25.00 parameters.