Silver Price Forecast: Soaring Bond Yields Create Headwinds for Precious Metals


  • Silver prices drop roughly 1.6% as U.S. Treasury yields break out to multi-year highs
  • Investors bet that the central bank tightening cycle will be much more aggressive than initially expected following this week’s hawkish Fedspeak
  • In this article we analyze key technical levels for XAG/USD

Most read: Gold May Lose its Shine as Fed Chair Powell Talks Bigger Rate Hikes to Tackle Inflation

Silver prices (XAG/USD) nosedived on Tuesday, dragged down by bond market developments after the Federal Reserve pledged to act expeditiously to restore price stability and signaled that it is prepared to raised borrowing costs by more than the standard 25 basis points hike in the future if warranted.

Over the past two sessions, the U.S Treasury curve has shifted sharply upwardsfollowing hawkish Fedspeak, with the 2- and 10-year yields soaring to 2.18% and 2.38%, respectively, their highest levels since May 2019. The promise to address inflation assertively has also helped lift real yields, bringing the U.S. 10-year TIPS to -0.57% from -0.71% one week ago. Against this backdrop, XAG/USD was roughly 1.6% lower to 24.80 in midday trading.

Non-yielding commodities, such as silver and gold, could quickly fall out of favor if rates continue to rise and the U.S. dollar stay supported on account of aggressive pricing of central bank tightening, though it is important to note that this forecast is partly dependent on the geopolitical outlook.

In reality, the only reason we have not seen a major change in the fortunes of precious metals is because of the increased geopolitical risk premium and safe haven buying activity. The war in Ukraine, which has been dragging on for nearly a month, poses serious headwinds for the global economy and could lead to “stagflation”. This uncertainty has prevented investors from substantially reducing defensive positions, limiting the recent corrective move observed in this space.

In any case, if geopolitical tensions ease and sentiment improves further, silver and gold could deepen their pullback initiated earlier this month, as traders turn their attention to riskier, higher-yielding assets. On the other hand, if hostilities in Eastern Europe intensify, safe-haven flows could accelerate again, triggering a rally in precious metals despite rising yields.


At the time of writing, silver has fallen towards key technical support spanning from $24.50 to $ 24.60. This area has been tested a few times in recent days, but has held firm, so we should keep an eye on how prices react around current levels for near-term guidance. Having said that, XAG/USD breaks out and drops below this floor decisively in daily closing prices, sellers could launch on attack on $24.17, the 50% Fibonacci retracement of the 2022 rally. On further weakness, the next major hurdle rests at $23.51.

On the flip side, if buyers return and silver pivots higher, initial resistance appears at $25.35. If bulls manage to push the metal above this barrier, price could be on its way to retest the 2022 high near $26.93.


Silver Price Chart Prepared Using TradingView


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—Written by Diego Colman, Contributor

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