Silver price forecast following a ferocious COVID-19 outbreak in Beijing

Silver price has edged lower in Monday’s session as a reaction to a stronger US dollar and higher Treasury yields. In the ensuing sessions, the focus will be on the Fed interest rate decision scheduled for release on Wednesday. Investors will also be keen on the COVID-19 outbreak recorded in Beijing.

What’s driving the market?

Data released on Friday by the US Labor Department showed that consumer prices had hit a fresh 40-year decade in May. On the one hand, the data boosted the demand for precious metals based on their status as inflation hedges. Even so, the surge in Treasury yields weighed on the non-yielding assets. As at the time of writing, the benchmark 10-year yields were at 3.23% after hitting a three-and-a-half years high of 3.25% earlier in the day.

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At the same time, the dollar index hit a one-month high of $104.86 in early Monday trade as investors shift their focus on the Fed interest rate decision scheduled for Wednesday. An environment of high interest rates is bullish for the greenback while exerting pressure on silver price.

COVID-19 fears is also weighing on silver price. China is the leading consumer of silver and other industrial metals. In recent weeks, the enacted restrictive measures have heightened concerns over the metals’ demand; an aspect that explains why the previous support zone of $23.00 has been evasive for five-and-a-half weeks now.

News released on Sunday showed a “ferocious” COVID-19 outbreak in Beijing’s populous district of Chaoyang. The news have raised concerns over stringent restrictive measures slightly over a week after Shanghai – the country’s financial hub – came out of an prolonged period of lockdowns that impacted the nation’s economic growth.

Silver price technical forecast

Silver price is trading below the psychologically critical level of $22.00 after Friday’s inflation data failed to yield enough bullish momentum to break the resistance. As at the time of writing, it was at $21.55; down by 1.47%. On a daily chart, it is trading below the 25 and 50-day exponential moving averages.

As has been the case for about five weeks now, the range between $21.29 and $22.20 will remain a crucial one in the new week. On the one hand, heightened inflationary pressures and a risk-off sentiment has boosted silver and other precious metals. Even so, the resistance level of $22.60, which is along the 50-day EMA, may remain evasive in the short term amid high rate hike expectations With a stronger US dollar and COVID-19 fears, silver price may drop past the range’s lower border. If that happens, the bulls will need to defend the support at $20.85.