Precious metals weakened on Wednesday, with silver losing 1.3% and dropping below 23 USD, while gold fell below 1,800 USD ahead of the US session.
Several bearish factors for silver
Yesterday’s daily candle on silver looks like a bearish pin bar – a bearish reversal pattern, implying the short-term uptrend might be over for now.
Additionally, the EURUSD pair lacks any bullish momentum, and the euro declined back below 1.13 today, strengthening the US dollar. The dollar index still trades above the strong support of 95.50-96.00, potentially limiting the upside in metals.
Furthermore, the two-year US yield rose to new cycle highs and traded above 0.75% for the first time since March 2020 as the Fed is getting ready to hike short-term interest rates.
As of right now, the market believes the US central bank will deliver the first rate hike in March, while two more rate increases are expected throughout the rest of the year.
The UBS bank is bullish on the USD and bearish on gold (silver) heading into 2022. They expect the US dollar to strengthen further in the year ahead as the Fed withdraws monetary accommodation faster than some other major central banks. They hold a positive view on oil as demand hits new highs and a negative outlook on gold against a backdrop of rising rates and a belief that inflation will fall.
Short-term outlook looks negative
Technically speaking, the next support is expected in the 22.50 USD area. If bulls fail to defend it, silver could very well crash toward the most significant buying zone at this year’s lows at 21.50 USD. The short-term negative momentum remains reinforced by the mentioned bearish pin bar.
A decline below 21.50 USD would confirm the long-term bearish trend, likely sending the commodity toward the psychological level of 20.00 USD.
On the other hand, if buyers reemerge, the resistance is at this week’s highs below 23.50 USD. Therefore, silver must jump above to cancel the immediate bearish threat.