A surge in bond yields has led to silver price retreating from intraday highs of 27.952. The small gains posted by the US Dollar are also helping to restrict recovery in the XAG/USD pair.
As the US markets return from the long weekend, US bond yields surged, causing a decline in precious metals on Tuesday. Rising bond yields make bond investments more attractive than non-yielding metals.
In the long-term, the success or failure of coronavirus vaccinations will determine the fate of precious metals. Eyes are on the FOMC and the US Congress, with further stimulus being expected ($1.9trillon worth). If the vaccination rollout is successful in checkmating the coronavirus, the US economy could bounce back sooner and the Fed could end its QE program earlier than expected. This could further raise bond yields and silver prices could take a hit as a consequence.
However, if the Fed ends up leaving the QE program well into 2022, this could lead to a fall in real bond yields and boost silver prices.
Technical Outlook for Silver
Silver price has managed to stay above 27.502, although that support level remains at risk. Today’s choppy price action continues to pose a risk to the 27.502 support, and a breakdown of that price level could allow sellers to reclaim intraday lows at 26.835. However, further declines in silver price action could bring in 26.325 and 26.034 as the next downside targets.
On the flip side, a bounce on the 27.502 support allows the silver price to target the 28.073 resistance, with 28.921 serving as an additional target to the north. This price resistance and 29.873 are the remaining barriers that silver price bulls need to clear to re-establish the uptrend.
XAG/USD Daily Chart