Silver Price Prediction – Silver prices rally despite rising yields and stronger dollar

Key Insights

• Silver prices rise amid signs of slower growth.
• Treasury yields rise with rate hikes looming.
• Oil prices marched higher on the EU agreement and the end of China’s lockdowns.

Silver prices climbed higher despite that the dollar and yields increased. Gold prices fall amid higher yields that increase the opportunity cost of holding gold and underpin the dollar.

Despite rising inflation, gold will likely not be a hedge unless the Fed does not take appropriate measures to fight spiraling inflation. The dollar became firmer amid rising yields.

Benchmark yields rise as investors maintain their focus on Fed rate hikes and mounting price pressures. The ten-year yield moved declined by 8.2 basis points to 2.928%. Oil prices continued to strengthen amid the EU ban on Russian oil and the ending of restrictions on the Shanghai lockdown.

The Job Openings and Labor Turnover Survey (JOLTS) report for April came in at 5.46 million, which declined sharply by 455,000 from the previous month. The gap between job openings and available workers was reduced.

Although the gap was reduced, the reading indicates that there is a tight labor market where labor supply matches the demand for labor.

The ISM Manufacturing Index also came out today, indicating that firms plan to ease the pace at which they hire employees. The employment reading registered 49.6, which is the first reading under 50 since November 2020. Hiring will slow down relative to labor supply.

These readings come in two days before May’s non-farm payroll report. Economists estimate that 328,000 more jobs will be added from the previous month and that the employment rate will fall to 3.5%.

Technical Analysis

Silver prices look to test the 10-day moving average near 21.9 despite maintaining a bearish bias. As rising inflation has become more of a concern for economists, the Fed plans to take any action needed to rein in inflation.

This situation will cause silver prices to face greater downward pressure going forward. The 50-day moving average remains crossed under the 200-day moving average, which is a headwind for XAG/USD and indicates downward momentum. Silver will likely head to the 20.4 level.

Support is seen near the May 13th lows near 20.4. Resistance is seen near former support near the 10-day moving average of 21.9. Short-term momentum turns positive as the fast stochastic had a crossover buy signal.

The medium-term momentum turns positive as the histogram prints positively with the MACD (moving average convergence divergence). The trajectory of the MACD histogram is in negative territory, which reflects a downward trend in price movement.