Higher Yields and Firm Dollar Pressure Silver Below Major Long-Term Midpoint
Spot Silver (XAGUSD) is lagging gold Thursday. Gold is catching a small bid after Wednesday’s washout, but silver couldn’t hold its early gain and rolled over with the dollar and Treasury yields climbing again. The break under last week’s low leaves the market looking for the next real support.
This isn’t a precious-metals rally that lost its way. It’s a split tape. Gold has a geopolitical bid underneath it. Silver is trading the financial side of the market, and higher yields, a firm dollar and another Fed hike still priced for December are winning that argument.
At 13:11 GMT, spot silver is trading at $58.98, down $0.81 or -1.36%. It opened at $59.83, reached $60.61 and bottomed at $58.50.
The Dollar and Long End Are Back on Silver’s Neck
The U.S. Dollar Index was up near 102.40 Thursday and within reach of Monday’s 102.535 high. Buyers stepped in around 101.754 Tuesday and the dollar hasn’t looked back.
The index remains well above its 50-day moving average at 100.04 and its 200-day moving average at 99.39. Silver is trading against a firm currency even without the dollar taking out Monday’s high.
The euro is doing part of the work for the dollar. French debt concerns and the widening spread between French and German bond yields have kept the euro under pressure. Currency traders are looking for the safer side of a global bond selloff.
Treasury yields aren’t helping. The 10-year was near 5.31% Thursday after reaching 5.354%, close to its highest level since 2002. The 30-year was around 5.68%, still sitting near its own 24-year high.
Wednesday’s 10-year auction went well and long-term rates stayed up anyway. Silver got nothing out of it.
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See all Silver forecastsThe Fed Did Not Give Silver a Reason to Buy
The Fed minutes didn’t change anything. Officials still see more tightening ahead.
The decision itself was unanimous. The disagreement was over why another hike was necessary. Some officials were focused on energy and other price shocks. Others were more concerned that inflation pressure was spreading through demand.
Governor Christopher Waller added to that Thursday. He said more rate increases are needed to get inflation back to target, but they don’t have to come at consecutive meetings.
October is quiet on FedWatch. December isn’t, with 87.1% odds of at least one more hike by the December 9 meeting.
The 30-Year Auction Is the Next Rates Test
The Treasury sells $22 billion of 30-year bonds Thursday. That’s the next live test for a market that’s been demanding more yield to absorb long-dated government debt.
Wednesday’s $39 billion 10-year sale drew strong sponsorship from global central banks. They took more than 80% of the auction against an average closer to 72%. The auction cleared at the highest yield since November 2000. Buyers did show up.
The long bond is a tougher sell. Deficit worries, higher oil prices and inflation concerns all weigh more at the far end of the curve.
Initial jobless claims came in at 197,000 for the week ended October 3, below the 200,000 estimate. That doesn’t give the Fed a reason to ease up.
Gold Is Holding Up, but Silver Is Not Getting the Same Bid
Gold edged higher Thursday after touching a two-month low in the prior session. Middle East shipping risk is still there, with tanker traffic through the Strait of Hormuz falling as attacks on vessels rose last week.
That’s keeping gold together near $4,100. It doesn’t carry over to silver.
Silver needs the dollar or yields to back off before it can build a real recovery. Thursday’s early move above $60 didn’t last because neither one turned its way. Gold can catch a hedge bid on geopolitical risk. Silver is still being priced as a metal facing tighter financial conditions.
Daily Spot Silver (XAGUSD) Technical Analysis
Spot silver is trading sharply lower Thursday after failing to hold the long-term 50% level at $60.835. The main trend is down according to the daily swing chart.
The move through last Friday’s low at $59.69 signals a resumption of the downtrend. A trade through the main top at $67.55 will change the main trend to up.
The minor trend is down. A trade through the minor top at $62.09 will turn the minor trend up.
The first resistance is $60.835, followed by $61.04 and the minor top at $62.09. The 50-day moving average at $64.21 remains well overhead.
The break below $59.69 puts the swing bottoms at $56.56 and $54.78 in play. The long-term value area extends from $60.835 down to the 61.8% retracement level at $46.48.
What to Watch
The 30-year auction is the next test for silver. The Fed has left a December hike in the price, the dollar is close to Monday’s high and the 10-year remains near a 24-year high. Sellers have control going into the sale.
Spot silver reached $60.61 early Thursday, then broke below $59.69 on the way to $58.50. The bias is to the downside while the main trend and minor trend are down, price remains below the long-term midpoint and the market trades under the 50-day moving average. The next swing bottom is $56.56.
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