Silver Price Analysis: XAG/USD set for fourth successive decline, under $25.00 level pre-Fed

• Silver prices trade in the red for a fourth successive session as risk appetite recovers and yields rise.
• XAG/USD bears will likely be eyeing a test of the 50 and 200DMA near $24.00 on a hawkish Fed surprise.

Weaker than expected US Retail Sales figures for February failed to give the precious metals complex a lift on Wednesday, with spot silver (XAG/USD) prices trading in the red for a fourth straight session. Risk appetite has been recovering on Wednesday, with global equities firmly on the front-foot amid a more constructive tone to Russo-Ukraine rhetoric (though the fighting in Ukraine shows no sign of letting up), and as energy and other commodity prices ease.

XAG/USD failed an earlier attempt to push above the $25.00 per troy ounce level and has since slipped back to the $24.80 region, where it trades lower by about 0.3% on the session, despite the weaker US dollar. There has been a lot of focus on the steep rise in US bond yields in recent days which has coincided with the sharp recent pullback in silver from its recent highs in the $26.00s. Higher yields reduce the appeal of holding non-yielding assets like precious metals.

Silver continues to trade above its weekly lows printed on Tuesday in the $24.50s and seems to have entered its typical pre-FOMC wait-and-see mode. The central bank is expected to lift interest rates by 25bps. The main market focus will be on the bank’s new economic forecasts and dot-plot, as well as Fed Chair Jerome Powell’s tone in the press conference. Investors are keen to measure the degree to which Powell will be willing to continue tightening policy in order to control inflation even in the face of slowing growth as a result of recent geopolitical events.

Given past remarks, analysts are leaning towards Powell choosing to control inflation at the expense of growth, rather than towards choosing to support growth at the expense of inflation, meaning hawkish risk. With XAG/USD now below its 21-Day Moving Average near $24.90, some short-term bearish speculators will be eyeing whether prices can fall all the way back to the 50 and 200DMAs in the $24.00 area in the coming days.