Silver Price Analysis: XAG/USD remains capped under $26.00 as investors mull geopolitics, incoming Fed meeting

Spot silver (XAG/USD) prices remain capped below the $26.00 level and within Thursday’s intra-day ranges, despite weakness US equities as investors demonstrate skepticism about earlier remarks from Russian President Vladimir Putin alluding to positive developments in talks with Ukraine. The situation on the ground remains tense as Russian forces continue their slow advance towards key Ukrainian cities including Kyiv and as Western officials sound the alarm about potential Russian use of chemical/biological weapons.

Meanwhile, Western nations continue to ramp up sanctions on Russia, with the G7 moving on Friday to remove Russia’s preferred nation trading status and also pushing to limit Russian access to IMF and World Bank funds. The potential for further negative headlines is probably helping to keep XAG/USD prices well support above earlier session/weekly lows in the $25.30-$25.40 area ahead of the Friday close. Equally though, hopes for progress in Russia/Ukraine talks following earlier more positive commentary from Putin has likely contributed to silver running into selling pressure nearer to $26.00.

Next week, geopolitics is not the only major driver that silver traders should keep an eye on. The Fed is expected to hike interest rates on Wednesday by 25bps. Of more interest to investors will be the tone of the statement, the remarks given by Fed Chair Jerome Powell in his post-meeting press conference and the updated dot-plot and economic forecasts.

Was it not for recent stagflationary geopolitical events, this week’s hot US inflation reading for February may well have weighed on silver as traders priced in a more aggressive Fed tightening. But with near-term inflation now set to surge to reflect recent commodity price action and the Fed now needs to grapple with a new big downside risk to US growth, short-term real rates don’t look set to move out of deeply negative territory for some time. That means, while its probably going to be a bumpy ride, XAG/USD has a good shot at getting back to earlier weekly highs in the $27.00 area in the coming days/weeks.