Silver Price Analysis: XAG/USD pushes into $23.20s shrugging off higher US yields

Spot silver (XAG/USD) prices pushed convincingly back above the $23.00 level on Tuesday, after attracting buyers amid an earlier session pullback to the 50-Day Moving Average in the $22.80s. At current levels, XAG/USD trades about 0.9% higher on the day in the $23.20s and close to its 21-Day Moving Average, with spot silver prices shrugging off a slightly strong buck and rise in US bond yields. US yields were up by a similar margin across the curve on Tuesday (3-5bps), with the 10-year hitting 1.97% for the first time since August 2019, though not managing a clean break above resistance in the form of Q4 2019 highs in the 1.96% area.

The move higher in nominal yields was in part driven by a rise in real yields that would typically be a negative for non-yielding inflation hedge precious metals like silver. Higher real yields represent 1) a rise in the opportunity cost of holding non-yielding assets and 2) a cheaper alternative form of inflation protection. But the negative correlation between the likes of silver and yields has been weaker as of late, perplexing analysts.

Some have said inflation concerns remain elevated as energy prices continue to surge and amid worries the Fed is “behind the curve”. Others have cited geopolitical concerns as driving safe-haven demand (though certainly not into bonds). Either way, as US Consumer Price Inflation data, which may well push US yields ever higher if it spurs further Fed tightening bets, looms, XAG/USD is trading up over 3.0% higher on the week. That marks a more than 5.5% rebound from last week’s lows at $22.00, which marked a double bottom for the year.