- Silver rallied sharply, more than 1.60%, as liquidity conditions improved.
- A strong US Dollar was no excuse for XAG/USD to print solid gains, bolstered by falling US bond yields.
- US S&P Global Manufacturing PMI was unchanged, despite an ongoing economic slowdown.
- Silver Price Analysis: To remain upward biased above $24.29.
Silver price rallies sharply irrespective of a strong US Dollar (USD), though falling US Treasury yields underpinned the white metal. Wall Street is poised for a higher open, even though China’s PMIs showed factory activity eased, and its reopening improved traders’ mood. At the time of writing, the XAG/USD is trading at $24.35 a troy ounce.
The sentiment is upbeat, as shown by US equity futures pointing for a higher open. Over the weekend release of China’s PMI showed that manufacturing activity slowed down amidst COVID-19 lockdowns imposed in December. However, the relaxation of China’s zero-tolerance policy was cheered by investors at the beginning of 2023.
In the meantime, the US Dollar Index (DXY), a gauge of the buck’s value against a basket of peers, is recording solid gains of 0.81%, up at 104.326, failing to weigh on precious metal prices. US Treasury bond yields began the year on the back foot, as the 10-year benchmark note is tumbling eight and a half bps to 3.746%, as traders started to re-price a dovish Federal Reserve (Fed) in 2023.
Another factor weighing on precious metals prices is the fall of US Real Yields, as shown by the US 10-year TIPS bond yield, plunging 12 bps, down at 1.471%, compared to last week’s close of 1.473%. This rewards holders of non-yielding Gold and Silver.
The XAG/USD continued its uptrend after hitting a daily low of $23.89 after a flat Monday session. A daily close above December’s monthly high of $24.29 could pave the way for a new trading range within the $24.29-$26.21 range.
At the time of publishing, the US S&P Global Manufacturing PMI for December was unchanged at 46.2. According to the report, factory activity was weaker through 2022, sparked by a contraction in output, new orders, and muted demand conditions.
Silver Price Analysis: XAG/USD Technical Outlook
The XAG/USD daily chart depicts the white metal remaining bullish biased. The Relative Strength Index (RSI) sits comfortably in bullish territory near overbought conditions, while the Rate of Change (RoC) suggests that buying pressure is beginning to build. Also, the XAG/USD is supported by a two-month-old upsloping trendline and by the 20-day Exponential Moving Average (EMA) around $23.47, which has been tracking Silver prices since mid-November. Therefore, further XAG/USD upside is expected.
The XAG/USD first resistance would be $24.50. Break above will expose the $25.00 figure, followed by April 18 daily high at $26.21.