Silver prices under pressure as US dollar remains in favour

• Silver is feeling the pressure of the US dollar as Europe’s covid recovery is thrown into jeopardy.  
• The Fed is what the market is now waiting for.  

Precious metals were on the back foot on Tuesday in the lead up to the  US  Federal Open Market Committee’s two-day meeting that concludes on Wednesday with a statement and the chairs presser.

At the time of writing, the price of silver is trading at $25.9015 and is down by some 1.31% having travelled between a high of $26.3095 and a low of $25.8364. By comparison, gold is flat on the day.  

Both the metals have been pressured lower on Tuesday by a stronger dollar, as investors awaited policy cues from a two-day US  Federal Reserve meeting.

However, the commodities sector as a whole has been sluggish, weighing more so on silver than gold. The gold to silver ratio was up some 1.22% in the remaining hours on Wall Street.  

Relatively distant to silver prices, per se, but somewhat of a concern for world growth prospects and demand for commodities in general, is the news that more and more EU countries are suspending the use of the AstraZeneca vaccine  such as Germany  yesterday.

As such we can expect to see further delays to the easing of restrictions.  

The US dollar and denominated assets could  be more appealing to investors as the US economy races ahead as a gangbuster in comparison to that of the eurozone.  

Meanwhile, in tomorrows Fed event, the central bank is expected to reiterate its pledge to keep interest rates pinned near zero until the economy reaches full employment.

That being said, if US Treasury yields rise too high  in the next few months, more expensive borrowing costs and higher prices could  derail the relentless stock market buying which could make precious metals more attractive as a store of value, or a  safe haven and even a hedge against inflaiton.

Until now, while precious metals are usually considered a hedge against inflation, the sudden spike in US  Treasury yields have deterred investment flows into the non-interest-bearing metal’s.

Silver technical analysis

The price has failed to break the recent daily highs and is now trapped between there and support within the technically bearish territory.

The 4-hour time frame  is somewhat less negative but MACD is on the verge of turning negative and the price has recent broken below both the bearish 10 and 20 SMAs. The 10 breaking below the 20 will solidify the bearish environment and send RSI on its way towards  the oversold territory.