Silver sinks to the bottom, faring behind gold as USD moons

  • Gold/Silver ratio spikes as silver longs get squeezed by dollar strength. 
  • A technical move sent XAG/USD to daily S1 on the back of Fed Powell's comments and market volatility. 

The price of the white metal came under immense pressure on Thursday, despite an optimistic outlook for economic growth prospects from the chair of the US Federal Reserve, Jerome Powell. 

At the time of writing, XAG/USD is trading at $25.2900 and down by over 3%. The gold to silver ratio is trading around 2.7% higher with gold down by less than 1% on the day. 

The US dollar has mooned on the back of US Treasury yields busting through critical levels with the 10-year yield well above 1.50%, advancing to a high of 1.5470%.

Despite Powell's dovish rhetoric and cautiously optimistic economic outlook, US stocks have also fallen as markets weigh the prevailing risks to the economic recovery pertaining to the threat of higher rates and inflation. 

Silver's technical rout

However, there is little fundamental as to why silver has fared so poorly, relative to commodity prices in general that remain in good stead. 

The CRB index is bid by 0.4% on the day, only modestly pressured around the Fed event. That being said, oil prices are the major component of the CRB index which have rallied over 4% on the day. 

There was just less dry powder in silver compared to gold and higher long speculative positions were potentially squeezed in a technical drop below 26.0950 on the hourly chart ahead of S1 at 25.7635.

Silver technical analysis

26.0950 was a firm-level on the hourly chart from which gave way to hourly S1 at 25.7635.

Some short covering took place in the 25.40s but the final blow to the lows of the day and a touch above daily S1. 

On a correction, the bulls can target the old daily lows and a confluence with a 38.2% Fibo retracement of the daily bearish impulse at 25.7640. 

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