Silver Price Analysis: XAG/USD witnesses losses ahead of pivotal Fed decision

• The XAG/USD hovers near the $22.70 level, experiencing 0.70% losses.
• Soft PPI figures underpin the Fed's dovish stance, producing a viable environment for sooner rate cuts.
• US bonds are sharply declining.

In Wednesday's trading session, Silver’s price (XAG/USD) recorded 0.70% losses, currently hovering around the $22.70 level. This decline comes ahead of the decision by the Federal Reserve, which will be a key driver in the market's next movements. In addition, the metal failed to capitalize on the lower US yields, which declined after the soft Producer Price Index (PPI) was reported from the US.

In that sense, the US Final Demand Producer Price Index (PPI) showed a yearly ascent of 0.9% in November, a slowdown from its 1.2% climb in October, as the US Bureau of Labor Statistics disclosed this Wednesday. The data fell short of the anticipated 1% market projection. Furthermore, the yearly Core PPI rose by a marginal 2%, underperforming October's figures and analysts' predictions of 2.4% and 2.2%, respectively.

As a reaction, US bond yields declined, as the US economy exhibited further evidence of inflation cooling down. The 2-year rate is noted at 4.66%, with the 5-year rate dropping to 4.17% and the 10-year yield further down at 4.15%. This downturn may lighten the load on non-yielding metals, as bond yields are commonly seen as the opportunity cost of holding these assets.

For the rest of the session, the Fed’s tone and fresh economic and interest projections will be closely watched for investors to place their bets on the calendar for rate cuts in 2024. In line with that, a more dovish approach may generate further pressure on bond yields which may open the upside to the gray metal.

XAG/USD levels to watch

On the daily chart, indicators suggest a bearish bias as the metal tallies an eight-day losing streak. The Relative Strength Index (RSI) sits flat and in negative territory, signaling that the selling pressure may be losing steam and that consolidation may be on the horizon.

However, the Moving Average Convergence Divergence (MACD) draws attention to the rising red bars, hinting that the momentum remains in favour of the sellers.

On a broader time frame, though, the position of the metal in relation to its Simple Moving Averages (SMAs) speaks more in favor of the sellers. The price is trading under the 20,100 and 200-day SMA, which indicates weakness, illustrating that bearish control is dominant over the long haul.

Support Levels: $22.30, $$22.15, $22.00.
Resistance Levels: $$22.80, $, $23.00, $23.15 (100-day SMA).

XAG/USD daily chart