- Silver recovered well from the $22.00 support but is still trading lower below $22.50 on the day.
- Hawkish central banks in Europe pushed up global developed market yields and hurt the attractiveness of precious metals.
- Focus now shifts to Friday’s US jobs report; Strong wage growth could push silver towards the mid-$21.00 level.
Although the precious metal has rallied sharply from previous session lows of just over $22.00 an ounce and is up nearly 2.0% to the current level of $22.40, it continued to trade higher at around 10.00 as of the start of the day Traded 0.9% lower in the $22.60. A sharp rise in US and global bond yields after a double dose of hawkish stance from two major European central banks has left precious metals markets behind, despite the sharp move lower in global equities on the back of horrible Facebook earnings. Downside moves in stock markets would typically be accompanied by increased safe-haven bids in precious metals, but the rise in the opportunity cost of holding non-yielding assets like silver (represented by higher yields) has robbed the metal of all potential gains.
Silver bulls will take heart after seeing how well support has held in the form of yearly lows around the $22.00 area on Thursday. But with global monetary policy now clearly on the tightening trajectory, not many will bet on a long-term recovery. This suggests that the $22.00 level is vulnerable, although traders are unlikely to attempt silver ahead of Friday’s jobs report, which will be very sensitive to expectations of Fed tightening, silver below to press. Metrics related to wage growth have been highlighted by Fed members as particularly important, suggesting that any upside surprise in Friday’s average hourly earnings data could trigger a hawkish shift in the Fed’s monetary policy expectations. Such an eventuality could be the catalyst to send silver below $22.00.
In this bearish scenario, attention would immediately turn to the next area of support at $21.40 (a 4.4% drop from current levels), a double bottom from September and December 2021. Longer term, when global yields Developed Markets Stay This Way If one buys into the story of tighter central bank policy and yields continue to rise, silver could expect a break towards support in the form of highs since June 2016.
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