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Silver expected to turn lower as yields highlight impending monetary tightening


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Silver expected to turn lower as yields highlight impending monetary tightening

Silver at risk of another bearish turn as rising inflation and yields point towards likely monetary tightening phase.

bg_silver.jpgSource: Bloomberg
 Joshua Mahony | Senior Market Analyst, London | Publication date: Monday 11 October 2021 

Precious metals at risk as yields rise

Gold and silver have been under pressure of late, with the recent rise in inflation driving expectations of a tightening phase from the likes of the Federal Reserve (Fed) and Bank of England (BoE).

Yields typically rise when economies improve and central banks raise rates, and thus it will be important to watch yields as a determinant of where precious metals go from here. That inverse correlation means that higher yields should bring weakness across precious metals.

Notably, the bull story for precious metals appears to gain prominence when central banks embark on a protracted period of easing. While we remain within that phase, the inflationary pressures tell a story of growing pressures on central banks to act. The chart below highlights how years of falling 10-year treasury yields (inverted) have given the basis for silver upside over the years.

Friday’s jobs report did provide some food for thought over whether the Fed will continue to push forth with plans to taper in November. Nonetheless, with a sharp decline in unemployment and wages continuing to signal a strong jobs market, there is a good chance Jerome Powell will look beyond the disappointing payrolls figure.

Silver_vs_10y_yields.pngSource: TradingView


The daily silver chart highlights how price has been consolidating over much of last week, with Friday’s jobs report providing a spike into the $23.14 swing-high.

The subsequent pullback has taken us back into the recent consolidation zone, which is likely to soon resolve with another turn towards the downside.

A rise through the $24.87 would be required to bring about a wider reversal of the bearish trend in place over the course of the past four months.

XAGUSD-Daily111021.pngSource: ProRealTime


The four-hour chart highlights how we have been grinding higher over the course of October thus far. A push up through the $23.14 level would bring about expectations of a more protracted retracement drawn from the $24.87 level.

Nonetheless, with the intraday pattern of higher lows in place, a break below the $22.21 level would bring about a fresh bearish signal for silver.

XAGUSD-4-hours111021.pngSource: ProRealTime
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