Silver Price Analysis: XAG/USD still lower on the day, but rebounds strongly from $22.00 support

• Silver rebounded well from support at $22.00 though still trades lower on the day under $22.50.
• Hawkish central banks in Europe spurred upside in global developed market yields, hurting the appeal of precious metals. 
• Focus now shifts to Friday’s US jobs report; strong wage growth could send silver lower towards the mid-$21.00s. 

Though the precious metal has enjoyed a sharp recovery from earlier session lows at just above $22.00 per troy ounce, rebounding nearly 2.0% to current levels in the $22.40s, it continues to trade lower by about 0.9% on the session, having started the day in the $22.60s. A sharp rise in US and global bond yields in wake of a double dose of hawkishness from two major European central bank has had precious metals markets on the back foot, despite sharp downside in the global equity space as a result of horrible Facebook earnings. Equity market downside would typically be associated with an increased safe-haven bid in precious metals, but the increase in the opportunity cost of holding non-yielding assets like silver (represented by higher yields) has robbed the metal of any potential gains.

Silver bulls will take heart having seen how well support in the form of annual lows in the $22.00 area held up on Thursday. But with the trajectory of global monetary policy now pointing firmly in the direction of tightening, not many will be betting on a long-term rebound. That suggests that the $22.00 level is vulnerable, though traders are unlikely to attempt to push silver below it ahead of Friday’s labour market report, to which Fed monetary policy tightening expectations will be highly sensitive. Metrics pertaining to wage growth have been flagged by Fed members are the thing to watch, suggesting any upside surprise in Friday’s Average Hourly Earnings data could trigger a hawkish shift in Fed policy expectations. Such an eventuality could be the catalyst to send silver under $22.00. 

In this bearish scenario, attention would immediately turn to the next area of support in the $21.40s (a 4.4% drop from current levels), a double bottom from September and December 2021. In the longer run, if global developed market yields continue to buy into the tighter central bank policy story and yields continue to surge, silver could be looking at a break back towards support in the form of a high from all the way back to June 2016.