Silver price edged lower on Tuesday following a surge in Treasury yields. Traders’ focus is on the Fed interest rate decision set for release on Wednesday.
Fundamentals
As observed in other precious metals, silver price extended its losses on Tuesday following a surge in Treasury yields. The benchmark 10-year US bond yields rose to its highest level since April 2011 as investors brace for the third super-sized rate increase of 75 basis points in a row.
The high yields weighed on non-yielding assets such as silver and the broader class of precious metals. Gold price remained below the previously steady support level of $1,680 for the third session in a row.
The risk-off sentiment and strong US dollar has been weighing on silver price in recent months. Since hitting the year’s high in early March, it has since dropped by about 20%. With these bearish factors, coupled with the slowed global economic growth, the metal may remain on a downtrend for much longer.
Silver price prediction
Silver price has been hovering around the critical level of 19.45 for about a week now. On Tuesday, it dropped below the 50-day EMA while finding support along the 25-day EMA at 19.15. As at the time of writing, it was at 19.21; down by 1.71%.
Based on both the fundamental and technical indicators, silver price will likely remain on a downtrend in the ensuing sessions. In particular, I expect it to remain subject to subtle movements as traders await further cues from the FOMC statement on Wednesday.
Being that the Fed is set to approve a super-sized interest rate hike of 75 basis points in its September meeting, silver price will likely continue to find resistance at the critical zone of 20.00. Indeed, a move above that level will invalidate this bearish thesis.
On the lower side, 18.90 is a support level worth watching in the immediate term. As a reaction to the Fed’s ultra-hawkish stance, the bears may have an opportunity to retest the lower level of 18.24.
