Silver prices (XAG/USD) are undergoing a significant sell-off, driven by the Federal Reserve’s (Fed) commitment to maintaining higher interest rates for an extended period. The white metal has experienced a pronounced downtrend, nearing $22.70, with expectations of continued volatility ahead of the release of United States Retail Sales and Industrial Production data.
In the Asian session, S&P500 futures displayed losses, signaling a decline in market participants’ risk appetite. The US Dollar Index (DXY) surged to approximately 103.50, fueled by remarks from Fed Governor Christopher Waller, who emphasized the cautious approach of the central bank towards potential rate cuts amidst inflationary uncertainties. Waller asserted that the Fed would only consider reducing interest rates if inflation demonstrates a sustained moderation. Concurrently, the 10-year US Treasury yields exhibited a slight dip, hovering just above 4.0%.
The CME Fedwatch tool indicates a shift in market expectations, with the likelihood of a 25 basis points interest rate cut decreasing to 62% following the more hawkish commentary from Fed Waller.
Looking ahead, market focus turns to the eagerly awaited US monthly Retail Sales data for December, scheduled for release at 13:30 GMT. Projections anticipate a 0.4% growth compared to the 0.3% increase observed in November, while Industrial Production is expected to remain stable.
From a technical perspective, the Silver price is approaching a critical support level near $22.51, traced back to the December 13 low, on a four-hour scale. Notably, the 200-period Exponential Moving Average (EMA) at $23.48 has acted as a substantial barrier for Silver bulls. The 14-period Relative Strength Index (RSI) slipping below 40.00 signals the initiation of a bearish momentum, underscoring the challenges faced by Silver in the current market environment. Investors will closely monitor these technical indicators for potential shifts in the silver market.