Silver Price Forecast: XAG/USD stumbles towards $20.50s on higher US T-bond real yields

Silver price retraces from daily highs of $20.85 as US Treasury bond yield rise due to US central bank policymakers, led by the Minnesota Fed President Kashkari commenting that it would take longer for the Fed to pause rate hikes. At the time of writing, the XAG/USD is trading at $20.54, losing 0.92%.

XAG/USD drops as US bond yields edge up; traders focus on Friday’s jobs report

US equities trading in the red portrays a sour market sentiment. In the last couple of days, Fed officials have reiterated that inflation is too high and that it would be premature to pause or slash rates, even if the economy gets into a recession. Nevertheless, Fed members have been cautious when speaking about the “R” word, though they acknowledged that the US economy is slowing.

In the meantime, US employment data, revealed by the Bureau of Labor Statistics, reported that Initial Jobless Claims for the week ending on October 1 rose by 219K, more than estimates of 204K. Of note that the rise in claims was just the third increase since the end of July 2022.

Even though bad data is perceived as good data for market players, meaning that as the labor market deteriorates, the Fed would likely tighten at a slower pace. Nevertheless, risk aversion persists, as the greenback remains in the driver’s seat as the US Dollar Index rises 0.42%, back above the 112.000 thresholds, ahead of Friday’s US Nonfarm Payrolls report.

Furthermore, elevated US Treasury bond yields keep the precious metals heavy. The US 10-year T-bond rate yields 3.813%, up by five basis points, while the 10-year Treasury Inflation-Protected Securities (TIPS) bond yield, a proxy for real yields, gains the same amount of bps as the nominal bond, remains at 1.60%.

What to watch

The US docket will feature the Nonfarm Payrolls report. Expectations for September’s figure are that 250K new jobs would be added to the economy, while the Unemployment Rate is expected to remain unchanged at 3.7%.

Also read: NFP Preview: Forecasts from nine major banks, employment trend slows down

Silver (XAG/USD) Price Forecast

The white metal is neutral-to-upward biased. Silver recovered from around $18.00, reclaimed the 20, 50, and 100-day EMAs, and is facing solid resistance at $21.00 a troy ounce on its way north. The Relative Strength Index (RSI) shows that buyers might be getting a respite before challenging the 200-day EMA at $21.90, but first will need to surpass the $21.00 mark.