Silver comes under pressure from a hawkish Fed and the US dollar hits new highs in 2022

  • Precious metals are traded with the Fed in mind.
  • The US dollar prevails as US yields continue to rise, weighing on silver prices.

Silver prices were under pressure during the mid-afternoon US session following a rally in the US Dollar. At the time of writing, XAG/USD is down around 0.9% after falling from a high of $24.9485 to a low of $24.2976 so far.

The greenback is higher after comments from Federal Reserve Governor Lael Brainard spooked investors about possible aggressive Fed actions and in anticipation of hawkish minutes tomorrow.

US Treasury yields hit multi-year highs, with yields taking off after Brainard’s comments and the DXY, an index that measures the greenback against a basket of currencies, hit 99.50 to test a new high for 2022 at 99.493.

The market is currently focused on the Fed’s intentions regarding its balance sheet and Brainard said the central bank could start shrinking its balance sheet as early as May and would do so “at a rapid pace.” She also indicated that interest rate hikes could occur at a more aggressive pace than typical increases of 0.25 percentage points.

Meanwhile, Fed officials began the process of policy normalization by raising rates 25 bps to 0.25%-0.50% at the March meeting and the minutes of that meeting on Wednesday will be published.

“The FOMC pulls no hawkish punches in its policy guidance, with Chairman Powell also hinting that further information on QT plans will be provided in the minutes (possibly including details on caps). We continue to expect a formal announcement from QT at the FOMC meeting in May,” analysts at TD Securities said.

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