Silver (XAGUSD) is currently trading at around $61.00 per troy ounce, partially recovering from a recent decline to multi-month lows. However, this local rebound does not change the fundamental picture: the precious metal remains under pressure from a strengthening dollar and rising US Treasury yields.
What stands in silver’s upward path ? The American debt market is our answer. Last week, the yield on 10-year government bonds reached 5.36%, the highest level in more than 24 years. Of course, such returns tend to attract investors and increase the opportunity cost of holding the precious metal, which generates no interest income. As a result, traders lean toward debt instruments, weighing on silver. Meanwhile, the greenback keeps getting stronger, with the dollar index (DXY) settling firmly near 18-month peaks. This makes the metal more expensive for holders of other currencies, further limiting demand and capping any price recovery.
Uncertainty surrounding the Federal Reserve’s (Fed) future monetary trajectory is another headwind. This week’s inflation data is likely to shed light on the US central bank’s path, and investors are all ears. These September readings could influence officials’ rate decisions. If the Consumer Price Index (CPI) comes in above expectations, the likelihood of a hike will rise, along with the Fed’s confidence to keep borrowing costs “higher for longer”. Such a scenario could support further growth of US Treasury yields and underpin the dollar—hardly a favorable environment for the precious metal. This may send XAGUSD lower in the near term.
The final recommendation:
— Sell silver at the current price of $61.00, targeting $55.50 within one month.
— Place Stop Loss at $65.00 to manage risks if the market plays against us.
This content is for informational purposes only and is not intended to be investing advice.
