Silver Price Analysis: XAG/USD stable in $23.00 area, with eyes on reopen of US bond market on Tuesday

Spot silver (XAG/USD) prices are consolidating in the $23.00 area on Monday in subdued, holiday-thinned North American trade as a result of US market closures for MLK Day. That leaves spot prices roughly around the mid-point of last Friday’s $22.80-$23.30ish trading range, with prices still very much sandwiched between support and resistance in the form of the 50-day moving average at $23.20 and the 21-day moving average at $22.77. These ranges are very unlikely to be broken ahead of the upcoming Tuesday Asia Pacific session given the lack of trading volumes at present.

The main focus of precious metals will be on the reopening of US bond markets on Tuesday after the implied yield on US 10-year note futures were reported to have gone as high as 1.86% on Monday. 10-year yields surged back above 1.80% last Friday to close at multi-year highs and, if Monday’s move is replicated on Tuesday, that would mark the highest level since January 2020. The upside last Friday was driven by a rally in underlying real yields, with the 10-year TIPS hitting its highest level since early Q2 2021 above -0.70%.

Higher real yields diminish the appeal of non-yielding precious metals and so if real yields continue to rally this week, perhaps as traders “price in” a hawkish upcoming Fed meeting next week, XAG/USD could be hit. The $22.60s has been an important balance area in recent months and would be a key level of support to watch. Beneath that, $22.00 is the next key area of support to keep an eye on. Compounding silver’s potential headwinds this week could be if the US dollar, as many FX strategists have been predicting, starts to recover some ground this week after getting battered amid a squeeze on over-crowded long-positions last week.