Silver price extended Friday’s gains on Monday amid a weaker US dollar and decline in Treasury yields. As markets digest SVB’s collapse, analysts are of the opinion that the Fed and other major central banks may have to pause on their rate hikes. As at the time of writing, the commodity was up by 6.18% at $21.78.
Fundamentals
SVB crisis
Financial markets are still digesting the Silicon Valley Bank (SVB) collapse. Notably, it is the second most intense collapse of a US lender on record. This follows the failure of Washington Mutual (WaMu) in 2008 at the height of the global financial crisis.
As a result, analysts are of the opinion that the Federal Reserve and other major central banks may be forced to halt their interest rate hikes. This is founded on the fact that the SVB crisis and the resultant financial stress is linked to the surge in borrowing costs.
Ahead of the Fed interest rate decision scheduled for next week, Goldman Sachs now sees the bank keeping its rates at the current level of between 4.5% and 4.75%. Previously, the investment bank forecast a hike of 25 basis points. Granted, it still expects the Fed to increase rates by 25 basis points in its May, June, and July meeting as it strives to deal with high inflation.
Prior to the SVB crisis, financial markets appeared to price in a hike of 50 basis points. This is after Jerome Powell noted that further increases may be needed to cool off inflation.
These series of events, which have pushed the US dollar and Treasury yields lower are largely behind the recorded silver price gains. As at the time of writing, the benchmark 10-year Treasury yields were down by 5.24% at 3.50%.
Silver price prediction
Silver price rose to a three-week high; edging closer to the support-turn-resistance zone of 22.00. Even with the recent rallying, it has continued to trade below the 50 and 200-day EMAs.
In the short term, 21.95 will remain a crucial resistance level that the bulls need to break to push the asset to the psychological level of 22.00 and beyond. Indeed, this is necessary to report a solid reversal.
If successful, 22.33 will be the next target. On the flip side, a corrective pullback will likely activate the support at 21.50 or lower at 21.13.
