Silver Price Analysis: XAG/USD back below $24.50 after Thursday’s failure to break above 200DMA

• Silver has fallen back under $24.50 on Friday despite a sharp decline in US government bond yields amid safe-haven demand.
• XAG/USD appears to be suffering from pre-weekend profit-taking after failing to break above its 200DMA on Thursday.

Despite a sharp drop in US bond yields on Friday amid heightened demand for safe-haven assets as global equities tumble, spot silver (XAG/USD) prices have been able to advance back to challenge weekly highs in the $24.70 area. Indeed, spot prices have actually reversed lower from Thursday’s highs and current trade about 0.3% lower on the day in the $24.30s. Typically, the combination of lower US bond yields (which reduces the opportunity cost of holding non-yielding silver) and risk-off flows would benefit safe-haven precious metals.

But XAG/USD, which still trades higher by more than 6.0% on the week, appears to be suffering from pre-weekend profit-taking after the pair on Thursday failed to break back above its 200-day moving average at $24.63. This failure could ultimately prove very costly. The last two times spot silver prices tested the 200DMA (in August and then again in November), prices failed to break above it and then ultimately fell by as much as 15% in the subsequent weeks.

With the Fed meeting, next week expected to greenlight an aggressive pace of monetary tightening in 2022, the scope for US bond yields and the US dollar to turn higher again is high. This could weigh heavily on precious metals. One factor this week that has been supporting prices has arguably been heightened geopolitical tensions in Eastern Europe with Russia seemingly on the verge of invading Ukraine. Any signs that a military incursion is underway/imminent may further boost safe-haven assets such as silver next week, which might be enough to shield it from hawkish Fed-related bearish vibes.