Silver Prices Face Downward Pressure Amid Rising Inflation Concerns and New Sanction on Russia

Key Insights

• Silver prices held steady on concerns over high inflation
• The dollar strengthens following the release of Fed minutes
• Benchmark yields continue to rise at a quicker pace of tightening
• Oil prices decline as US and EIA members commit to releasing strategic reserves

Silver prices slightly declined as there were rising concerns over inflation due to the war in Ukraine. Benchmark yields rose amid a hawkish Fed stance and more aggressive policy. The ten-year treasury yield climbed higher to 2.61%, approaching highs from March 2019. New sanctions on Russia caused gold and silver prices to rally due to increasing risk-off sentiment.

Oil prices fell 2.2%, trading at $99.73 per barrel as the US commits to deploying 60 million barrels from strategic reserves, and member states of the EIA commit to releasing 120 million barrels. 180 million barrels would be released in total.

FOMC meeting minutes from March released on Wednesday indicated that the Fed plans to shrink the balance sheet by $95 billion per month likely to begin in May. There would be a maximum of $60 billion in treasuries and $35 billion in mortgage-backed securities, which would be phased in over three months. The meeting also signaled that a 50-basis point increase was likely to take place at upcoming meetings. Members were leaning toward more aggressive moves. The Fed also increased its inflation outlook and lowered its expectations for economic growth.

Technical Analysis

Silver prices eased today to a 24.4 level as rising inflation counters downward pressure from aggressive rate hikes and a strengthening dollar. Still increasing new sanctions on Russia could be a tailwind due to silver’s safe-haven qualities. Silver faces downward pressure to the $24.00 level due to rising yields and a firmer dollar This situation can cause XAG/USD to break below support.

Support is seen near the horizontal trendline near 23.6. Resistance is near the 50-day moving average near 24.5. Short-term momentum turned negative as the fast stochastic had a crossover sell signal.

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