Silver Price Analysis: XAG/USD falls back to probe $25.00 area as US equities/bond yields recover

• Spot silver prices fell back to test the $25.00 level on Wednesday as US stock markets/bond yields recovered.
• A reassuring message from Fed Chair Powell that the Fed plans to cautiously press ahead with tightening helped sentiment.

Spot silver (XAG/USD) prices have pulled back sharply on Wednesday as risk appetite takes a turn for the better and global bond yields mean revert following Tuesday’s outsized decline. XAG/USD pulled back from Tuesday’s highs above $25.50 per troy ounce to probe the $25.00 level. At one point, the precious metal fell as low as the $24.80s, where it at the time traded lower by more than 2.0% but has since recovered back to the $25.15 area to now trade down just under 1.0%.

US equities were able to break out to their highest levels since mid-February as Fed Chair Jerome Powell delivered a reassuring message on the first day of his semi-annual testimony to Congress, undermining demand for safe-haven precious metals. Powell said that the Fed will move forward with prior guidance to begin a rate hiking cycle in March and reiterated that the Fed will be nimble in reacting to the evolving outlook.

He also noted that the Russo-Ukraine war added considerable uncertainty, and his measured tone appeared to reassure investors that the US economy remains in a steady pair of hands with Powell at the head of the Fed. With US stocks now pressing higher than their levels prior to the start of the Ukraine war and US bond yields having staged a decent rebound (10s are back 1.85% having gone under 1.70% on Tuesday), that will make it more difficult for silver to test last week’s highs in the $25.60s.

XAG/USD, as is also the case with other asset classes, is likely to remain choppy on geopolitical headlines in the coming days as fighting in Ukraine continues. There will likely be much focus on talks between a Russian and Ukrainian delegation which the Russians have teased could result in a ceasefire (though this is very much not the market’s base case). Otherwise, the second day of Powell’s testimony on Thursday and more US data in the form of ISM Services PMI on Thursday and the official jobs report on Friday will also be traders’ radars.