Silver Price Analysis: XAG/USD trims losses amid weak dollar and lower yields, positive market mood

• The XAG/USD is rallying during the American session towards the $23.20 level with a current 0.90% increase after bottoming at $22.80.
• Still, the metal holds onto mild losses on the day.
• USD struggles to maintain the previous week's bullish momentum as risks on flows resume.
• Investors await key CPI data on Thursday to place their bets on the Fed.

In Monday's trading session, the silver prices, represented by the XAG/USD pair, took a bullish turn, trading at a higher level of around $23.15. The rally originates from a combination of a weakening Dollar and descending yields, giving silver an advantageous footing at the start of the week.

In its final meeting of 2023, the Federal Reserve recognized a dip in inflation rates and affirmed that 2024 will be free of rate hikes. The Fed even suggested a 75bps easing, leading market speculations to factor in rate cuts for March and May. In that sense, markets now await the next set of data after last week’s strong labor reports, which were offset by the disappointing ISM PMI figures, keeping afloat the dovish rhetoric.

Market attention will shift to the release of the US December Consumer Price Index (CPI) data on Thursday. Projected figures indicate an increase to 3.2% YoY, a subtle rise from prior 3.1% rates. Nevertheless, the anticipated annualized core CPI registers a slight relaxation to 3.8% from November's 4%.

Currently, US bond yields are declining. The 2-year rate stands at 4.32%, while the 5 and 10-year yields are at 3.93% and 3.97%, respectively. These lower yields bolster the appeal of non-yielding metals as the opportunity cost of holding them decreases.

XAG/USD levels to watch

The daily chart indicates that the metal portrays a bearish sentiment, reflecting a dominant selling momentum. Based on the position of the Relative Strength Index (RSI), which is on a negative slope within the negative territory, a heightened selling pressure is evident. The negative bias is further amplified by the Moving Average Convergence Divergence (MACD), which presents flat red bars, indicating that sellers maintain the upper hand, although at a decreasing rate.

When observing the Simple Moving Averages (SMAs), the price's position below the 20, 100, and 200-day SMAs, further implies that bears retain control on a broader scale.

XAG/USD daily chart