Silver Crashes Below 22 USD
09 May 2022
As the USD strengthened again, pushing the dollar index above 104 for the first time in 20 years, the precious metals dropped notably, sending silver 2% lower on Monday.
Fed sends metals lower
The Federal Reserve of the United States announced a 50-basis-point rate hike last week, the highest since 2000, pushing the yield on the benchmark 10-year US government bonds to the highest level since November 2018 at 3.2%, ahead of Wednesday's inflation numbers, fueled by worries of an upside surprise.
Futures markets are pricing in a 75 percent likelihood of a 75 basis point rate hike at the Fed's next meeting in June, as well as more than 200 basis points of tightening by the end of the year.
On Friday, Richmond Fed President Tom Barkin raised the hawkish standard by stating he was "not ruling out support for a 75-bps boost."
Sentiment remains negative
Silver easily fell below December and January lows near 22 USD and tagged stop-losses of long positions there, further lowering the price. The following support appears in the 21.50 USD region, where the commodity has reversed many times already.
However, if the price declines below 21.50 USD, the long-term trend could change to bearish, targeting the psychological level of 20 USD.
Alternatively, silver must climb above 22 USD to cancel the immediate bearish threat. The selling pressure is expected to persist as long as the metal remains below 23 USD.
On the other hand, the market is heavily oversold, increasing the chances of a violent short-squeeze rally.