Silver (XAG/USD) extended its decline to near $66.50 during the late Asian trading session on Monday, marking its lowest level in over two months [1]. The sell-off in silver was driven by intensified hawkish expectations for the Federal Reserve, following stronger-than-expected US Nonfarm Payrolls (NFP) data for May and persistently high inflationary pressures, which have pushed US Treasury yields higher [1]. The CME FedWatch tool indicated that the probability of at least one Fed interest rate hike this year surged to 73.8%, up from 45.2% a week earlier, further diminishing the appeal of non-yielding assets like silver [1].
In early European trade, the 10-year US Treasury yield approached a fresh two-week high at 4.57% [1]. The US NFP report released on Friday showed the economy added 172,000 jobs in May, significantly above the 85,000 estimate, with April's figure revised up to 179,000 from 115,000 [1]. Meanwhile, concerns about accelerating US inflation have been exacerbated by elevated energy prices amid an ongoing energy supply crisis and renewed fears of conflict in the Middle East following exchanges between Israel and Iran over the weekend [1].
Investors are now focused on the upcoming US Consumer Price Index (CPI) data for May, scheduled for release on Wednesday. The headline CPI is estimated to rise to 4.2% year-on-year from 3.8% in April, which could further influence market sentiment and Fed policy expectations [1].
From a technical perspective, XAG/USD is trading well below its 20-day exponential moving average (EMA) at $74.44, reinforcing a bearish near-term outlook. The Relative Strength Index (RSI) has dropped to 33.62, just above oversold territory, suggesting that while downside pressure remains, selling momentum may be slowing [1]. Key support lies near the six-month low at $61.01, with a break below potentially opening the way to $60.00 [1].
CONCLUSION
Silver prices have come under significant pressure due to rising US yields and heightened expectations of further Fed tightening, following robust US jobs data and persistent inflation concerns. Technical indicators point to continued downside risk, with investors closely watching upcoming US CPI data for further direction. The market remains bearish on silver in the near term.