Silver Prices Face Downward Pressure Amid Prospects for Hawkish Fed and China Lockdown Uncertainty

Key Insights

• Silver prices traded lower amid risk-off market sentiment.
• Benchmark yields fall on China’s uncertain Covid situation.
• Oil prices moved lower amid uncertain demand due to China’s lockdowns. 

Silver prices fall amid the broader sell-off of commodities. The dollar strengthened against all major currencies ahead of expectations for Fed tightening. Benchmark yields declined sharply today after spiking at the end of last week amid concerns over China’s covid shutdowns. 

Gold prices retreated to April lows below $1900 amid rate tightening expectations and a robust dollar. Oil prices declined on demand concerns due to China’s Covid situation.

Oil prices also faced downward pressure because a robust dollar makes commodities more expensive for other currency holders. The oil market faced tight supply conditions due to the Russian supply crisis and outages in Libya. 

St. Louis Fed President Bullard stated that a 75-basis point rate hike might be necessary to combat spiraling inflation. While other officials stated that a larger rate hike would weaken the economy, other market participants have endorsed it.

Investors remain focused on the March Personal Consumption Expenditures Index, which is a critical inflation measure being released on Friday. Federal Reserve Chair Jerome Powell stated that a 50-basis point rate hike was likely in May. 

Technical Analysis

Silver prices were trading lower by 2.5% today, breaking under the key resistance level of the 200-day moving average of 23.85. Silver prices will face downward momentum amid plans for a 50-basis point rate hike and could test the December 2021 lows near the 21.4 level. Hawkish Fed tightening undermines silver prices.

Support is seen near the 200-day moving average of $22.776. Resistance is near the 50-day moving average of $24.92. Short-term momentum is negative but turning positive as the fast stochastic had a crossover might have a crossover sell 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.