Silver started to turn lower towards the $25.00 level on Tuesday, due to a strong rise in US bonds yields and fears that a rate hike from the FED would hit non-yielding precious metals.
Global growth concerns coming into focus in wake of the IMF releasing its latest downbeat assessment of world economic growth, which suggests a dramatic slowdown is underway.
With US bond yields hitting fresh multi-year highs, with the 30-year eclipsing 3.0% for the first time since April 2019, it appears that precious metals have finally succumb to the rout in the bond market.
Looking ahead, a key event this week will be a speech from Fed Chair Jerome Powell delivering a scheduled speech on Thursday. Yesterday, hawkish comments from Fed policymaker James Bullard, who reiterated a call for rates to hit 3.5% by the year’s end hit precious metals.
Bullard and suggested his openness towards a 75-bps rate rise have underpinned the latest yield rally. Higher yields raise the opportunity cost of holding non-yielding assets like silver.
Current sentiment metric towards silver show that traders are becoming overly bullish towards the price of silver. The ActivTrader market sentiment tool shows that 89 percent of traders are bullish towards silver.
With this strong way sentiment bias it is not bullish for silver price as retail have gone crazy on the buy side, which could hint at more steep correction for silver price ahead.
Silver short-term Technical Analysis
The short-term technicals for the shiny-metal shows that a technical pullback appears to be underway, following a former breakout from a large falling price channel.
Looking at the well-denoted pattern on the four-hour price chart, a coming price correction towards the towards the price wedge seems likely, towards the $24.20 support area.
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Silver Medium-term Technical Analysis
The daily chart shows that silver remains a strong buy while trading above the $25.00 level, which is the location of the 200-day moving average of the shiny-metal.
I would expect that the price of silver could hit $24.00 if its losses the 200-day moving average. If not, we should probably expect a retest of the $26.00 resistance level.
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