Silver Price Analysis: XAG/USD stable in $22.50 area ahead of key US jobs report

Spot silver (XAG/USD) prices were stable close to the $22.50 per troy ounce level on Friday in the run-up to the release of the US January jobs report at 11330GMT. Since yesterday’s volatile price action, which saw XAG/USD lurch lower towards $22.00 before rebounding sharply, trade has calmed in typical pre-US jobs report fashion, as traders refrain from placing big bets. Fed officials have emphasised this week that the timing and pace of tightening this year is data-dependent, and that measures of wage growth are a key metric they are keeping an eye on. That suggests that any sizeable upside surprise in the upcoming Average Hourly Earnings growth data (which are released as part of the jobs report) could see a hawkish repricing of Fed tightening expectations.

After Thursday’s hawkish BoE/ECB due sent global developed market bond yields lurching higher, strong wage growth numbers could put further upwards pressure on yields, creating downside risks for precious metals. Higher yields increase the opportunity cost of holding non-yielding assets like silver. In this scenario, weekly lows at $22.00 will come into focus, with any bearish break opening the door to a run lower towards the 2021 double bottom at $21.50. In an environment where three of the world’s most important central banks (Fed, ECB, BoE) are all clearly moving towards a removal of stimulus/tightening of financial conditions, the long-term bullish case for silver is weakened.