Silver price declines after Fed officials’ hawkish tone

on May 27, 2021
  • Silver price is trading lower by 0.12% at 27.64 as US dollar strengthens.
  • Fed’s Randal Quarles and Richard Clarida, have hinted at probable start of taper talks in upcoming meetings.
  • Rising Treasury yields have further exerted pressure on silver price.

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Silver price is trading lower as the US dollar and Treasury yields rise. The hawkish tone from various Fed officials has helped strengthen the greenback.

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Taper talks

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On Wednesday, the Federal Reserve’s Vice Chairman of Supervision, Randal Quarles revived the topic on taper talks. Currently, the US central bank is purchasing assets worth $120 billion monthly. The program includes buying mortgage-backed debt and Treasury securities valued at $40 billion and $80 billion respectively.

In his speech, Quarles stated,

“If my expectations about economic growth, employment, and inflation over the coming months are borne out, it will become important for the FOMC to begin discussing our plans to adjust the pace of asset purchases at upcoming meetings.”

Quarles’ remarks came a day after Fed’s Vice Chairman, Richard Clarida makes similar utterances. In an interview with Yahoo! Finance, Clarida noted that while the inflationary pressures seem largely transitory, the central bank may begin tapering talks in its upcoming meetings. However, he indicated that it would all depend on the flow of data.

The Fed officials’ hawkish tone is a bearish catalyst for silver price as it has boosted the US dollar. Similar to other precious metals, silver price has an inverse correlation with the greenback. After hitting a four-month low of 89.53 in the previous session, the dollar index is trading at 90.03.

The greenback is also finding support in the rising Treasury yields, an aspect that has resulted in the decline of silver price. The benchmark 10-year US bond yields are at 1.58, up by 0.54%. The 5 and 30-year Treasury yields are also up by 0.79% and 0.21% respectively.

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Silver price technical outlook

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Silver price is trading lower by 0.12% at 27.64. it has declined from Wednesday’s intraday high of 28.22. On a two-hour chart, it is below the five and ten-week exponential moving averages with an RSI of 40. I expect the precious metal to be range-bound in the near term. The borders of this horizontal channel will be at the important resistance-turn-support level of 27.50 and along the two EMAs at 27.80.

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