Silver Price Prediction – Silver Is Under Pressure As Dollar Moves To New Highs

Key Insights

• Silver declined closer to the $19 level as the U.S. dollar rallied at the start of the week. 
• Treasury yields are declining but traders stay focused on the strong dollar, which is bearish for precious metals. 
• Worries about a potential global recession put additional pressure on silver markets. 

Silver Is Losing Ground At The Start Of The Week

Silver is moving lower at the start of the week as the U.S. dollar tests new highs against a broad basket of currencies.

The strong dollar has served as the key bearish catalyst for precious metals in recent weeks. The U.S. Dollar Index quickly moved through the 105 level at the start of July and tested the 108 level.

Treasury yields have pulled back from the highs that were reached in mid-June, but this move was not sufficient enough to provide any support to precious metals as traders remained focused on the strong dollar.

Silver is trading in the oversold territory, while the U.S. dollar is technically overbought. However, it remains to be seen whether silver will be able to rebound from current levels as strong dollar is not the only problem that puts pressure on silver markets.

Silver Markets May Stay Choppy Until Wednesday

Silver is sensitive to industrial demand, so recession fears have also contributed to the recent move which took silver from the $22 level to the $19 level. There is little doubt that the European economy is heading into recession, but the U.S. economy remains in a decent shape.

Markets are worried that aggressive rate hikes from the Fed will push the U.S. economy into recession. However, the Fed has a chance to orchestrate a “soft landing”. If the upcoming economic reports indicate that the U.S. economy is losing steam, silver will quickly gain additional downside momentum and settle below the $19 level.

Silver traders should keep an eye on the U.S. Inflation Rate report, which will be released on Wednesday. Analysts expect that prices increased by 8.8% year-over-year in June.

If the report is worse than expected, silver will suffer a double blow. The U.S. dollar will move higher, which will be bearish for precious metals. At the same time, bond markets will start to price in more interest rate hikes, which will put additional pressure on precious metals. If the report exceeds expectations, silver should have a good chance to rebound from current levels. As the inflation report may have a significant impact on markets, trading may stay choopy until Wednesday.

For a look at all of today’s economic events, check out our economic calendar.