Silver Prices Continue to Move Lower as the Dollar and Bond Yields Strengthen

Key Insights

• Silver prices face downward momentum ahead of the Fed rate hike.
• Treasury yields rally despite disappointing GDP report.
• Oil prices were mixed in volatile trading amid global supply constraints and demand concerns.

Silver prices traded lower due to the imminent rate hike and a robust dollar. The dollar hit two-decade highs. Treasury yields rose as unexpected economic data pointed toward an economic slowdown. The 10-year yield was up 4 basis points at 2.85%.

Gold prices dipped to two-month lows on a stronger dollar but slightly recovered later in the trading session. Oil prices stabilized after volatile trading this morning as investors digested the tightening of Russian oil supply and the potential of slowing demand in China. A stronger dollar undermines oil prices.

US Gross Domestic Product (GDP) surprisingly declined at a 1.4% pace in Q1. Analysts expected that GDP would increase by 1%.GDP measures the output of goods and services in the US for the three-month quarter. Although consumer expenditures increased by 2.7%, prices increased by 7.8%.

Price increases countered the rise in spending. The GDP report indicates the uncertain economic outlook amid the backdrop of the Fed’s sequence of rate hikes. Although the data does not signal a recession, it does signal slower economic growth going forward.

Technical Analysis

Silver prices continue to trade lower by the 23.00 level, hitting a two-month low near 23.20 in today’s trading session. The imminent Fed rate hike has buoyed yields and the dollar. This situation has put downward pressure on silver going forward. The commodity might test early February 2022 lows near the $22 level. 

Support is seen near the November 2021 lows near $23.00. Resistance is seen near the former support level of the 200-day moving average near 23.83. Short-term momentum is turning positive as the fast stochastic might have a crossover buy signal.

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