Silver Reverses Its Course In Response To Fed's Barkin Hawkish Stance

(November 29, 2023 - Patricio Martin)

• The Silver hovers around the $25.00 level after retreating from May highs around $25.25 
• Hawkish words from Fed's Barkin made US yields recover somewhat. Still, they stand at multi-month lows.
• All ayes are on Thursday’s PCE figures from the US from October.

In Wednesday's session, the Silver spot price trimmed daily gains, stabilising at $25.00 after reaching a multi-month high of $25.25 earlier in the session. The retracement was largely influenced by the hawkish words of the Federal Reserve (Fed) Thomas Barkin, which seemed to have spooked markets. Market focus is still on Thursday’s October Core Personal Consumption Expenditures (PCE) figures.

In line with that, Barkin stated that he is not ruling out the possibility of another interest rate hike and remains sceptical about achieving the target inflation rate of 2%. He also mentioned that inflation will be more stubborn than expected, which seems to limit the hype after the last Consumer Price Index (CPI) from the US, which made markets bet on the Fed approaching the end of its tightening cycle.

In the meantime, the US government bond yields erased some losses but are still weak. The 2-year rate stands at 4.65%, its lowest since July, and the 5 and 10-year yields are seen at 4.21% and 4.27%, respectively, at their lowest since September. That being said, as long as the US yields continue to edge lower, the grey metal may see further upside. For Thursday’s session, the US will report October’s PCE figures, the Fed’s preferred gauge of inflation, which may affect the bond markets as they will model the expectations of the bank’s next steps.

Silver levels to watch

The indicators on the daily chart are a positive outlook for the metal, but a correction may be on the horizon. On the one hand, the Relative Strength Index (RSI) position, which indicates overbought conditions and seems to be flattening, suggests that selling pressure could soon rise as the market temperature comes down from heated levels. This ties in with the recent behaviour of the bulls, who seem to take a breather after steering the currency pair to highs since early May.

The Moving Average Convergence Divergence (MACD), on the other hand, with its rising green bars, points to an increasing buying momentum. This indicates that there is a strong bullish sentiment at play, lifting upward pressure. This perception is also supported by the pair's positioning over the Simple Moving Averages (SMAs), more specifically, the 20, 100, and 200-day SMAs.

Support Levels: $24.90, $24.50, $24.30.
Resistance Levels: $25.50, $25.70, $26.00.