Silver Prices Rise Following Robust Wage Inflation Figures
Silver prices moved higher on Monday, bouncing off the recent lows and rallying for a second consecutive trading session. The upward rebound in silver prices came as gold also moved higher. The dollar rallied, which usually generates headwinds for silver. U.S. Treasury yields moved higher across the curve, but the 2-year yield outpaced the long end of the Treasury curve, causing additional flattening. Goldman Sachs on Sunday wrote in a note to clients that it now figures the Fed to enact four quarter-percentage-point rate hikes in 2022. This scenario is now priced into the interest rate market and generates additional headwinds for riskier assets.
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Technical Analysis
On Monday, silver prices rebound despite higher yields. Support is seen near the December lows at 21.69. Resistance is seen near the 10-day moving average at $22.79. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices have moved out of oversold territory which reflects accelerating positive momentum. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).
Inflation is the Fed’s Target
Despite the weaker than expected nonfarm payroll report released on Friday, the Fed is likely full steam ahead toward raising rates. There were likely seasonal factors, but wage inflation was not one of them. Average hourly earnings rose more than expected as the U.S. saw its fastest inflation pace in nearly 40 years. Wages climbed 0.6% for the month and were up 4.7% year over year. That compares with respective estimates of 0.4% and 4.2%.