Silver Price Analysis: XAG/USD slumps to low $25.00s as US yields surge

Though the tone of geopolitical updates regarding the Russo-Ukraine war remain downbeat, and despite global growth concerns coming into focus in wake of the IMF releasing its latest World Economic Outlook, precious metals markets finally appear to have succumbed to rising global yields. Spot silver (XAG/USD) was last trading nearly 2.5% lower on the day in the low $25.00s as long-term US bond yields hit fresh multi-year highs, with the 30-year eclipsing 3.0% for the first time since April 2019.

Hawkish comments from Fed policymaker James Bullard, who reiterated a call for rates to hit 3.5% by the year’s end and even suggested his openness towards a 75 bps rate rise have underpinned the latest yield rally. Higher yields raise the opportunity cost of holding non-yielding assets like silver. Looking ahead, a key event this week will be a speech from Fed Chair Jerome Powell on Thursday at the IMF/World Bank meetings.

Powell will likely solidify expectations for a 50 bps rate hikes at next month’s Fed meeting and likely a few more meetings thereafter, suggesting further upside risks for yields and downside risks for silver. XAG/USD bears will be eyeing a test of support in the form of the 21 and 50-Day Moving Averages on either side of the $25.00 per troy ounce level.

Global energy prices turned sharply lower on Tuesday amid profit-taking, with this also weighing on precious metals amid a lessened demand for inflation protection. Whether this is a short-term move that is reversed by dip-buying or the start of a more lasting push lower could be make or break for silver’s near-term prospects.

Up until Tuesday, silver (like other precious metals) had been resilient to upside in US bond yields in recent weeks due to hawkish shifts in Fed tightening expectations and this has largely been as a result of elevated demand for inflation/stagflation protection given the impact of the Russo-Ukraine war and associated sanctions on Russian exports.