- Summary:
- Silver prices fell momentarily below $23.00 on Monday amid a holiday in the US, but the fundamentals can help XAGUSD return to the upside.
Silver prices have returned above the $23.00 mark on Tuesday, seeking to continue the uptrend that was disrupted in Monday’s session. XAGUSD was at +0.13%, trading at $23.022 an ounce at the time of writing. Gold’s poor cousin has had a stellar run since the year begun, with the market severally rejecting prices below $22. Furthermore, it has only ended two of the last seven sessions in red.
The commodity’s decline on Monday should, however, be read in the context of markets in the US closing for the Presidents’ Holiday. Silver’s use in multiple industrial applications means that its demand is closely linked to the performance of the global economy. Around 50% of the silver traded globally is used commercially in various processing and manufacturing industries.
The latest US Producer Price Index (PPI) released last week showed an increase by +0.3%, the highest monthly jump since August 2023. Similarly, the Philadelphia Fed Manufacturing Index rose to 5.2%, beating the forested -8% decline. Notably, that was only the fourth positive reading since May 2022. A continuation of the trend will create bullish sentiment around the commodity, pushing up the prices.
Rising US Treasury yields could exert some pressure on silver prices, not so much as relates to hedging inflation, but as relates to profit margins. Gold historically performs better when the global economy grows faster and inflation slows down. Silver, on the other hand, outperforms gold during times of economic boom and inflation. Therefore, the current inflationary pressures could play in favour of silver.
Technical analysis
Silver prices currently signal consolidation, and will need to break the resistance at 23.17 to stop a slide to the downside. Action above the pivot 23.17 will confirm upside momentum if the price breaks the next resistance at 23.35. Such a momentum could potentially build up to cross the next resistance at 23.50. However, as long as the resistance remains at 23.17, the price will find support at 22.85, and continued bearish control could pull it further down to 22.70.
