Silver Price Analysis: XAG/USD subdued under $22.50 ahead of Friday’s key US jobs data

Spot silver (XAG/USD) prices remained subdued to the south of the $22.50 mark, having slipped beneath this level on Wednesday. On the day, spot prices are flat but losses on the week stand at nearly 4.0%. Moreover, since the silver topped out at its 200-day moving average of just under $25.50 back in early/mid-November, prices have declined more than 12%. The main driver of recent weakness in silver markets has been a strengthening US dollar (the DXY has risen from around 94.00 to current levels around 96.00) and rising US real yields 5-year TIPS are roughly 40bps higher versus mid-November levels under -1.90%. Both reflect a hawkish shift in Fed expectations.

Looking ahead, silver is likely to continue to trade in subdued fashion on Thursday in the absence of any important new data coming out about the Omicron variant, given that the November US jobs report is due out on Friday. Silver prices have been under pressure this week in wake of Fed Chair Jerome Powell’s surprisingly hawkish tone on inflation, the economy and the potential for a faster QE taper. The major US macro data releases so far this week have been strong, endorsing the Fed’s bullish view and Friday’s jobs report is expected to be no different. For reference, the report is expected to show 550K jobs added to the US economy in November.

A strong US labour market report for November may add further fuel to XAG/USD’s recent bearish trend. Bears will be targetting a test of the September lows in the $21.50 area soon. This is a key area of support going all the way back to September 2020. A break below there opens the door to a run towards the 50% retracement back to the post-pandemic high just above $30.00 to the post-pandemic low just under $12.00 at $20.90, as well as the psychologically important $20.00 level.