Silver Price Analysis: XAG/USD pulls back from above $26.00 to $25.70 area, geopolitics remain in driving seat

• Silver has pulled back to trade roughly flat on the day in the $25.70 area having been above $26.00 earlier.
• News of talks between the Russian and Ukrainian foreign ministers in Turkey on Thursday triggered some profit-taking.
• But with de-escalation unlikely, recent macro trends are likely to continue, meaning higher silver remains a good bet.

After hitting its highest levels since mid-July 2021 to the north of the $26.00 per troy ounce mark, spot silver (XAG/USD) prices have pulled back sharply and now trade with only very modest on the day gains of roughly 0.1%. In early European trade, the precious metal had been trading as much as 1.7% higher, with analysts/traders citing the surprise news that the Russian and Ukrainian Foreign Ministers are set to meet in Turkey on Thursday as driving the pullback. Chatter over the weekend about potential Western bans on Russian energy exports, coupled with generalised concerns about the global economic impact of the Russo-Ukraine war and the risk it might escalate into a wider nuclear conflict has supported silver recently.

Traders have been buying the precious metal as a hedge against inflation and economic weakness, so naturally, any news that suggests de-escalation might be on the cards (like Thursday’s talks in Turkey) has the potential to trigger profit-taking. However, rhetoric from the Kremlin on Monday suggests Russia’s demands on Ukraine for a ceasefire and peace remain maximalist (i.e. not something the Ukraine government will accept), suggesting the prospect for agreement on Thursday or before is slim. As geopolitics remains in the driving seat as far as macro sentiment is concerned and amid a quiet economic calendar on Monday, talks between a Ukrainian and Russian delegation at 1600GMT (allegedly) will be the main event of the day.

For now, XAG/USD is finding support at last week’s highs in the $25.70 area. If this support hold, that would be taken as a bullish near-term sign. Seeing as silver has now cleared $26.00 once already this week, the prospect for a renewed push higher towards resistance in the $27.00 looks good, so long as recent macro trends (higher energy and other commodity prices, lower equities) continue. With little prospect of de-escalation of the intense war going on in Ukraine right now, that seems a good bet.