XAG / USD sank below $ 22.50 ahead of key US jobs data Friday
- Spot silver fell below $ 22.50 on the Thursday ahead of Friday’s key US labor market data.
- A strong report could cement silver’s recent bearish move.
Spot silver prices (XAG / USD) remained subdued south of the $ 22.50 mark after falling below that level on Wednesday. During the day, spot prices are unchanged, while losses during the week are almost 4.0%. In addition, prices have fallen more than 12% since the high of the 200-day moving average of just under $ 25.50 in early / mid-November. The main reason for the recent weakness in the silver markets has been a stronger US dollar (the DXY has risen from about 94.00 to a current level of about 96.00) and the rising US real yields 5-year TIPS are about 40 basis points higher than in mid-November, below -1.90%. Both reflect a restrictive shift in Fed expectations.
Looking ahead, silver is likely to continue trading cautiously on Thursday as no major new data on the Omicron variant is released as the US labor market report for November is released on Friday. Silver prices came under pressure this week due to Fed chief Jerome Powell’s surprisingly restrictive tone on inflation, the economy and the potential for quantitative easing to be quicker. The key US macro data released this week has been strong, confirming the Fed’s bullish view, and Friday’s job report is expected to be no different. For reference, the report is expected to reveal 550,000 new jobs in the US economy by November.
A strong US labor report for November could further fuel the recent bearish move in XAG / USD. The bears will soon be targeting a test of September lows in the $ 21.50 area. This is an important area of support that dates back to September 2020. A break below this opens the door for a run in the direction of the 50% retracement back to the post-pandemic high just above $ 30.00 to the post-pandemic low just below $ 12.00 at $ 20.90 as well as the psychological one important level of USD 20.00.