Silver Price Analysis: XAG/USD underpinned by falling buck/US yields, but not able to reclaim $25.00 yet

• A continued pullback in the US dollar and yields from recent highs is giving precious metals a lift.
• XAG/USD is now more than 4.0% higher versus Tuesday’s sub-$24.00 lows, but has been unable to reclaim the $25.00 level.
• Waning geopolitical risk premia and caution ahead of key US data is holding back the silver bulls for now.

Even though the latest batch of US data (strong ADP and robust Q4 GDP and Core PCE numbers), alongside fresh hawkish commentary from Fed policymakers has been interpreted as solidifying expectations for a 50bps rate hike from the bank in May, the US dollar continues to come under intense selling pressure, supporting the precious metal complex. US yields also continue to ease back from recent highs, with the US-10 year on Wednesday falling back under the 2.40% mark, unwinding some of the recent upwards pressure on the “opportunity cost” of holding non-yielding assets like precious metals.

Spot silver (XAG/USD) prices are thus trading higher by about 0.75% on the day, though have not been able to mount a lasting push to the north of the $25.00 per troy ounce level. Still, at current levels in the $24.90s, XAG/USD is trading with gains of more than 4.0% versus Tuesday’s lows just under $24.00. Traders at the time piled in to buy silver as it tested its 200-Day Moving Average at $23.96. Successful defense of support in the key $24.00 area will have many bulls eyeing a retest of last week’s highs in the $25.80s.

But the recent shift in tone of Russo-Ukraine peace negotiations towards greater optimism that a peace deal can be struck means that geopolitical risk premia, a key factor underpinning silver prices in March, is somewhat lessened. Meanwhile, in the next two days, key US Core PCE and officials labour market data will be released, ahead of which its not unusual to see precious metal, FX and bond traders exercising greater levels of caution and more subdued trading conditions. Perhaps then it isn’t too much of a surprise that XAG/USD failed its efforts to push back above $25.00 on Wednesday.