- Spot silver is subdued in the mid-$23.50s as traders await the next release of the Fed’s January meeting minutes.
- Traders will value support for a larger 50 basis point move, although following recent inflation surprises, the minutes are somewhat outdated.
- Geopolitics remains the main short-term driver for XAG/USD, amid continued confusion over the alleged partial withdrawal of Russian troops from the Ukrainian border.
After largely ignoring the latest mixed US retail sales report, silver spot prices (XAG/USD) are consolidating in the $23.50 region as attention turns to the January Fed meeting minutes to be released soon at 7:00 p.m. GMT. At current levels just below the $23.50 mark, the precious metal is trading with gains of around 0.5% on the day.
Traders will be looking for clues about the FOMC’s level of support for a bigger 50 basis point rate hike in March, which Fed Chairman Jerome Powell refused to rule out at the press conference that took place. followed the meeting. The minutes are somewhat outdated, however, as sentiment within the committee may have shifted in a hawkish direction following recent surprises in consumer and producer price inflation data.
This implies that markets might not get too choppy if the minutes are a little more dovish on recent more hawkish comments from the Fed, including from St Louis Fed President and 2022 FOMC voting member James Bullard. He called for rate hikes of 100 basis points by the end of the second quarter, as well as the start of a passive liquidation of balance sheets. The risk of volatility following the minutes for silver and other precious metals is therefore perhaps somewhat mitigated compared to previous versions of the Fed meeting minutes.
Geopolitics will likely remain the main driver of precious metals market sentiment. XAG/USD was heavily weighed down by Russian proclamations that it would partially withdraw its troops from its border with Ukraine, retreating sharply from February highs near $24.00 per troy ounce. But Western leaders, as well as government and intelligence officials have warned they have yet to see any real evidence of de-escalation and troop withdrawals, adding to the confusion.
A further build-up of tension could easily send silver spot prices back towards a test of weekly highs and a potential breakout towards long-term downtrend resistance in the mid-$24.00s.