Spot silver prices (XAG/USD) is trading higher on the day but continues to remain within a defined range, even as the bond markets continue to act as the principal driver of silver price action. $30.00, these peaks having been hit at the height of retail investor speculation into precious metals markets.
Last week, the real yields on the US 10-year TIPS pushed higher, setting off USD strength in the first two trading days of the week. This led to a migration of capital away from non-yielding metals and into the rising bond yields.
However, the FOMC Chairman Jerome Powell is expected to testify at Congress this week. This comes a week after a dovish Fed statement that pressured the US Dollar, allowing silver to regain some lost ground. The prospect for additional US fiscal stimulus continues to weigh on the greenback. Further statements by Powell on Wednesday that doubles down on the stimulus rhetoric could be supportive of silver prices. Also supporting silver prices could be a situation where Powell signals the Fed’s intention of containing the yield growth by buying more long-term bonds.
On the other hand, if the FOMC Chair is silent on the rise in bond yields or does not feel that the Fed needs to act to keep a lid on yields, this could support USD strength and be potentially limiting for silver prices.
Technical Levels to Watch
Today’s 2.15$ rise in silver prices has violated the 27.502 resistance and looks set to target the 28.073 price level. However, the 3% penetration close above 27.502 must be confirmed for this move to be sustained. A further advance that takes out 28.073 opens the door towards 28.359, with 28.921 constituting a further barrier to the north.
On the flip side, failure to sustain the bullish move towards 28.073 allows for a pullback which could retest 27.502 and possibly the 26.868 support level. A decline below this point breaches the ascending support trendline, targeting 26.325 and possibly 26.034 as well, if the decline is extensive.