Silver Price Forecast: XAG/USD clings to gains above $18.50 despite higher US T-bond yields

Silver prices advance despite higher US Treasury bond yields.
Hawkish commentary by Jerome Powell fueled estimations that a 75 bps rate hike in September is a done deal.
US 10-year Treasury Inflation-Protected Securities (TIPS), a proxy for real yields, approaches the 0.90% threshold, a headwind for precious metal prices.

Christian Borjon Valencia FXStreet

Silver price holds to earlier gains after Federal Reserve Chair Jerome Powell emphasized that the Fed will continue to tighten monetary policy at the expense of slower economic growth. The XAG/USD is trading at $18.52, above the opening price, by 0.56%.

Sentiment has shifted mixed, with US equities fluctuating. Fed officials are crossing newswires as the Federal Reserve blackout period approaches, led by Fed Chair Jerome Powell. On Thursday, Powell commented that the Fed is “strongly committed” to bringing inflation to its 2% target and added that the Fed needs to act“forthrightly, strongly as we have been doing.”

Related to this, Barclays said now that it sees a 75 bps rate hike in September, but a 50 bps in November, via Reuters.

The US Department of Labor featured Initial Jobless Claims for the week ending on September 3, with figures falling to 222K, lower than estimates. In the meantime, the US Dollar Index, a gauge of the buck’s value measured vs. a basket of peers, gains 0.34% at 109.905.

Meanwhile, the US 10-year Treasury yield edges up two bps, sitting at 3.294%, putting a lid on the white metal gains. Also, the US 10-year TIPS, a proxy for real yields, climbed sharply, approaching the 0.90% mark, as recent Fed’s commentary fueled expectations of a 75 bps rate hike in September.

Late in the day, Chicago’s Fed Charles Evans said the labor market remains tight and added that the Fed is “increasing interest rate expeditiously.” Evans said that he expects GDP growth to remain at positive levels and commented that inflation would likely remain around 4 to 5% in core PCE and by 2023 at 3%, perhaps 2.5%.

Silver Price Forecast (XAG/USD): Technical outlook

Silver price remains neutral-to-downward biased. Even though silver buyers reclaimed the July 21 low at $18.24, downward risks remain. Additionally, solid resistance at around the 20-day EMA at $18.93, alongside the 50-day EMA at $19.24, would be challenging levels to overcome as the Relative Strength Index (RSI) turns horizontal. On the other hand, if XAG/USD registers a daily close below $18.24, it would open the door for a re-test of the YTD low at $17.56.

Author

Christian Borjon Valencia

FXStreet

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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