XAG/USD declined nearly $23.50 ahead of Fed minutes on an eye on news out of Russia and Ukraine

• Spot silver is subdued in the mid-$23.50 level as traders await the forthcoming release of minutes from the Fed’s January meeting.
• Traders will note support for a larger 50 basis point move, although the minutes are a bit stale after recent inflation surprises.
• Geopolitics remains the key short-term driver for XAG/USD amid ongoing confusion over Russia’s alleged partial troop withdrawal from the Ukrainian border.

After mostly shrugging off the latest mixed US retail sales report, spot silver (XAG/USD) prices are consolidating in the $23.50 area as focus shifts to the forthcoming release of January Fed meeting minutes 1900 GMT. At current levels just below $23.50, the precious metal is trading with daily gains of around 0.5%.

Traders will be looking for hints of FOMC support for a larger 50 basis point rate hike in March, something Fed Chair Jerome Powell didn’t rule out in the post-meeting press conference. However, the minutes are somewhat stale as opinion on the committee may have shifted in a hawkish direction following the recent surprises in consumer and producer price inflation data.

That means markets might not be too excited if minutes come across as a little more dovish compared to recent more hawkish Fed comments, particularly from St. Louis Fed President and 2022 FOMC voting member James Bullard. He calls for rate hikes of 100 basis points by the end of the second quarter and the start of a passive balance sheet run-off. The risk of volatility following the silver and other precious metals minutes may therefore be slightly reduced compared to previous Fed minutes releases.

Geopolitics will likely remain the primary driver of sentiment in precious metals markets. XAG/USD was weighed heavily by Russian announcements that it would partially withdraw troops from its border with Ukraine, marking a sharp decline from February highs near $24.00 a troy ounce. But Western leaders and government and intelligence officials have warned they have yet to see actual evidence of a de-escalation and troop withdrawal, adding to the confusion.

Further build-up of tensions could easily send spot silver prices back towards a test of weekly highs and a possible breakout towards long-term downtrend resistance at the mid-$24.00 level.