Silver Price Analysis: XAG/USD subdued in near $23.50 pre-Fed minutes, with one eye on Russia/Ukraine news

• Spot silver is subdued in the mid-$23.50s as traders await the upcoming minutes release of the January Fed meeting.
• Traders will gauge the support for a larger 50bps move, though following recent inflation surprises, the minutes are somewhat stale.
• Geopolitics remains the main near-term driver for XAG/USD, amid ongoing confusion over Russia’s alleged partial troop withdrawal from Ukraine’s border.

Having largely shrugged off the latest mixed US Retail Sales report, spot silver (XAG/USD) prices are consolidating in the $23.50 region as focus turns to the upcoming release of the minutes of the January Fed meeting at 1900GMT. At current levels just under the $23.50 mark, the precious metal is trading with on-the-day gains of about 0.5%.

 Traders will be looking for clues as to the level of support on the FOMC for a larger 50bps rate hike in March, something which Fed Chair Jerome Powell refused to rule out in the post-meeting press conference. The minutes are somewhat stale, however, as opinion on the committee might have shifted in a hawkish direction following recent Consumer and Producer Price Inflation data surprises.

That implies that markets might not be too fussed if the minutes come across a little more dovish compared to recent more hawkish Fed commentary, most notably from St Louis Fed President and 2022 voting FOMC member James Bullard. He has been calling for 100bps of rate hikes by the end of Q2, as well as the start of passive balance sheet run-off. The risk of volatility in wake of the minutes to silver and other precious metals is thus perhaps somewhat lessened versus prior Fed meeting minute releases.

Geopolitics will likely remain the main driver of precious metal market sentiment. XAG/USD was weighed on heavily by Russian proclamations that it would be partially withdrawing troops from its border with Ukraine, pulling back sharply from February highs near $24.00 per troy ounce. But Western leaders, as well as government and intelligence officials have been warning that they have not yet seen any actual evidence of de-escalation and troop withdrawal, making for heightened confusion.

A further build-up of tensions could easily send spot silver prices back towards a test of weekly highs, and to a potential breakout towards long-term downtrend resistance in the mid-$24.00s.