Late last week, silver prices came under substantial pressure, closing Friday’s session at $66.25. What burdened them? The metal’s key headwind was Federal Reserve (Fed) Chair Kevin Warsh’s hawkish rhetoric, which he clearly expressed during the recent Jackson Hole symposium. According to the central bank’s head, policymakers are prepared to raise interest rates if US inflation does not ease to the target 2% level. This speech has significantly bolstered market expectations of a September increase. At the same time, 2-year American Treasury yields climbed to 4.3%–4.4%. The dollar, meanwhile, posted its strongest daily gain in roughly two and a half months. This toxic cocktail pushed silver prices down 4.3% on Friday, underscoring the metal’s high sensitivity to shifts in monetary expectations.
Another factor behind the current decline could be stubbornly high inflation. The latest Personal Consumption Expenditures (PCE) index rose to 3.7% year-over-year, against forecasts of 3.6%, strengthening the case for maintaining the Fed’s hawkish policy. This is bad news for silver. Increasing bond yields boost the opportunity cost of holding non-income-generating precious metals. If the upcoming labor market report turns out to be stronger than anticipated, the Fed’s rate hike in September will become much more likely, providing additional support for the dollar and triggering another sell-off in silver.
From a technical perspective, prices failed to breach the $71.00 resistance level and pulled back, with the next potential target sitting at $61.50.
The final recommendation:
— Sell silver at the current price of $66.25, aiming for $61.50 within one month.
— Place a Stop Loss order at $71.00 to manage risks if the market plays against us.
This content is for informational purposes only and is not intended to be investing advice.
