- The price of silver falls as US bond yields rise as the US dollar weakens.
- Sentiment remains fragile, souring since the close of European equities.
- Silver price action will remain choppy ahead of the US CPI report.
The price of silver is pulling back from weekly highs hit Monday at $20.74, but changing hands near the August 9 lows of $20.42 at the start of the Asia Pacific session. At the time of writing, XAGUSD is trading at $20.52, up slightly by 0.15%.
Silver Falls Despite Weak US Dollar
Wall Street ended Tuesday’s session in the red, as Asian stocks point to a lower open. The greenback weakened, as seen in the US dollar index at 106.302, down 0.07%, while the yield on US 10-year bonds rose two basis points to 2.783%.
Sentiment soured for several reasons. First, last Friday’s strong U.S. jobs report remains on traders’ minds, dispelling recession fears, as STIRs on money market futures show, accounting for an 88% chance. a 75 basis point rate hike from the Federal Reserve. That said, alongside hawkish comments from the Fed, policymakers reiterated the Fed’s commitment to bringing inflation down. Most members have expressed a desire to go to 75 basis points at the next meeting, while the Fed Mester of Cleveland and the Fed Evans of Chicago remain open to 50 or 75 basis points.
In addition, the looming US inflation figures are worrying investors. The U.S. consumer price index (CPI) for July is expected at 8.7% year-on-year, down from June’s 9.1%, while core CPI numbers are expected at 6, 1% YoY vs. 6.2% in the previous reading.
After Wednesday’s main event, XAGUSD traders should expect comments from Chicago Fed President Charles Evans and Neil Kashkari of the Minnesota Fed, who will cross wires after the release. By Thursday, San Francisco Fed President Mary Daly will be crossing the wires on Bloomberg.
Silver (XAGUSD) Scenarios for US CPI on Wednesday
Therefore, XAGUSD traders should be aware of important US economic data. If the CPI beats expectations, we could see a reaction in US bond yields to the upside, supporting the greenback on the upside, consequently causing precious metal prices to fall. Alternatively, if US inflation shows signs of moderating, silver and commodity prices could rise, while US bond yields and the greenback will fall.
Silver (XAGUSD) Major Technical Levels