Silver Price Analysis: XAG/USD dips briefly under $24.00 before recovering back above $24.50 in volatile trade

• Silver has been volatile on Tuesday, dipping briefly under $24.00 but then recovering back above $24.50.
• Positive Russo-Ukraine updates triggered the initial dip to sub-$24.00 levels, whilst falling yields then helped the recovery.
• But that still leaves prices lower by more than 1.0% on the session.

It’s been a volatile session for spot silver (XAG/USD), with prices now back to just above $24.50 having at one point been below the key $24.00 level to test key support in the form of the 200-Day Moving Average. A combination of different factors have been exerting themselves on precious metal prices, with the initial drop under $24.00 as a result of the knee-jerk reaction to positive Russo-Ukraine updates, but the more recent rally likely as a result of a pullback in yields.

Indeed, commodity prices such as oil saw sharp downside in wake of the most recent positive Russo-Ukraine commentary and this saw bond market participants paring back on the inflation compensation they demand on bonds (i.e. via higher yields). Lower yields reduce the “opportunity cost” of holding non-yielding precious metals and, so, arguably, the reversal lower helped support spot silver recovery from more than one-month lows.

With silver thus having found robust support at the $24.00 area and at its 200DMA, the bears might not be confident of continued downside going forward. Lockdowns in China, whilst they might ease energy prices, risk exacerbating global supply chain snags which might worsen the inflation problem, thus presenting an upside risk for silver. That will be key a theme to watch.

Aside from this and geopolitics, there is plenty of data this week for investors to sink their teeth into, culminating in the official jobs report on Friday. All this data should feed into the narrative of a hawkish Fed that wants to get rates back to neutral as quickly as possible and Fed rhetoric, like Patrick Harker’s most recent remarks, are also likely to reinforce this narrative. This is a downside risk for silver, but high inflation may continue to negate it for now.