Silver price is under pressure ahead of the latest US Consumer Price Index (CPI) data. It has declined by more than 1.7% to the current $25.74. Other commodities like copper, gold, and crude oil have also retreated, with the Bloomberg Commodity Index (BCOM) falling by more than 0.20%.
What happened: Silver price has struggled in the past few days. It has dropped from the year-to-date high of $30.05 as investors start worrying about the rising bond yields. On Monday this week, the 10-year Treasury yield rose to almost 1.60%, its highest level in more than 13 months.
The 2-year also rose to 0.165% while the longer-dated 30-year rose to 2.248%. This performance has been because of optimism that the US and European economies will rebound as they accelerate their vaccination drive. As a result, this has seen more investors sell risk assets like bonds and emerging market currencies.
Higher yields are also a signal for higher inflation. If inflation rises, it increases the probability that the Federal Reserve will increase rates earlier than expected. Higher rates, on the other hand, would lead to a stronger US dollar, which is usually negative for silver.
Still, there are several positives for silver. For one, the US is implementing a $1.9 trillion stimulus package, which could lead to a faster recovery. This could have a positive impact on the demand for silver.
Also, recent data showed that the manufacturing sector is relatively strong around the world. This could mean more demand since silver is an industrial metal. Later today, the silver price will react to the latest US inflation data.
The daily chart shows that the silver price has bounced back from its weekly low of $24.85. It reached a high of $26.10 yesterday, which is slightly above the lower line of the ascending channel. Still, the pair is forming a head and shoulders pattern. Therefore, there is a possibility that it will rise slightly and then resume the downward trend since the H&S is usually a bearish reversal pattern.
