Silver Prices Decline
On Monday, silver prices (XAG/USD) fell to around $66.50 during late Asian trading, marking their lowest point in over two months. The decline is largely due to significant selling pressure as the Federal Reserve’s hawkish stance intensifies. This shift comes in response to unexpectedly strong U.S. nonfarm payrolls (NFP) data for May, alongside persistent inflation fears that are driving up U.S. Treasury yields.
The probability of the Fed raising interest rates at least once this year surged to 73.8%, up from 45.2% just a week ago, according to the CME FedWatch tool.
When yields on interest-bearing assets climb, non-yielding resources like silver can seem less appealing.
In early European trading, the yield on the 10-year U.S. Treasury note reached a near two-week high of 4.57%.
The latest U.S. NFP report indicated a gain of 172,000 new jobs, which is significantly above the anticipated 85,000. Additionally, April’s figures were revised upwards from 115,000 to 179,000.
The inflation situation in the U.S. is already concerning, primarily driven by rising energy costs amid an ongoing energy supply crisis. Recent tensions between Israel and Iran have further stoked fears that inflation could increase.
Investors are now looking ahead to the U.S. Consumer Price Index (CPI) data for May, set to be released on Wednesday. Expectations suggest that the headline CPI might rise to 4.2% year over year, compared to 3.8% in April.
Silver Technical Analysis
As it stands, XAG/USD is trading near $66.50. This price is considerably below the 20-day exponential moving average (EMA) of $74.44, and the current trend appears bearish, with the recent drop distancing itself from dynamic resistance.
The Relative Strength Index (RSI) has decreased to 33.62, remaining just above oversold levels. This indicates that, while there’s still downward pressure, selling momentum could be slowing down.
On the upside, the 20-day EMA at $74.44 serves as the initial resistance point that bulls need to reclaim in order to alleviate the current bearish sentiment and allow for a stronger recovery. Conversely, silver prices are approaching a nearly six-month low at $61.01. A fall below this point may lead to further declines towards $60.00.
