Silver Price Analysis: XAG/USD rides high on Fed’s dovish shift as US 10-year yield drops to fresh bottoms

• The XAG/USD approaches the $24.30 level, showing a 1% rally.
• The benchmark 10-year yield dropped to its lowest level since July, favoring the metal's advance.
• US PCE data on Friday will further guide investors on the next Fed moves.

In Wednesday's session, XAG/USD is seeing a rally, currently trading at a level of $24.30, favored by the dovish shift in the Federal Reserve (Fed) and the fall to fresh lows of the US 10-year yield. Positive home sales from November from the US failed to trigger movements on the US Dollar.

In that sense, The US Housing sector saw a minor bounce in Existing Home Sales, according to the November report from the National Association of Realtors (NAR), with the estimated housing values increasing by 0.8% from its previous -4.1%.

What's driving the metal are the US Treasury yields, which are currently on a downtrend. The 2-year rate declined to 4.38%, while the 5- and 10-year rates are at 3.9% each. The benchmark rate declined earlier in the session to 3.87%, its lowest since July and drop in yields lessens the opportunity cost of holding non-yielding metals, hence favoring the price.

The downhill seen in yields is fueled by the dovish hints last week from the Federal Reserve (Fed), whose officials forecast three rate cuts in 2023. The easing bets may be exacerbated on Friday when the US releases November's Personal Consumption Expenditures figures (PCE), the Fed's preferred inflation gauge, which is expected to have decelerated with the headline and core figures seen coming in at 3.3% and 2.8% YoY.

XAG/USD levels to watch

The daily chart suggests that the pair has a moderately bullish bias over the medium term. The Relative Strength Index (RSI) currently resides in positive territory while, the Moving Average Convergence Divergence (MACD) shows larger green bars, a clear sign that the upward momentum is picking up and favors the buyers. It also underscores the strength of the bullish presence.

On a broader scale, the pair's position above the 20, 100, and 200-day Simple Moving Averages (SMAs) suggests that the overall trend favors the bullish side.

Support Levels: $24.10 (20-day SMA), $23.60 (200-day SMA), $23.00.
Resistance Levels: $24.50, $25.00, $25.30.

XAG/USD daily chart