Silver price outlook ahead of the US PCE index

Silver price has bounced off the week’s low while still finding resistance at $25.00. Scepticism over Russia’s claims to scale back and the decline in Treasury yields have supported the precious metal. Investors are also keen on the PCE index scheduled for release later on Thursday.

Russia-Ukraine crisis

On Tuesday, silver price dropped to its lowest level in over a month amid optimism regarding the Russia-Ukraine talks in Turkey. Russia announced that it will reduce its military presence near Kyiv and Chernihiv in an attempt to increase mutual trust and facilitate further negotiations.

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

Even so, the precious metal held above the critical level of $24.00, which has been a steady support zone since Russia invaded Ukraine over a month ago. The subsequent bounce back, which has extended in early Thursday trade, comes amid scepticism over Moscow’s claims.

According to Pentagon spokesman John Kirby, Russia appears to be pulling its military forces away from Kyiv to reorganize and resupply them for use in another region in Ukraine as opposed to sending them back to Russia. Indeed, bombings in the outskirts of Chernihiv and Kyiv on Wednesday have substantiated the West’s doubts.

Treasury yields

Silver price has further found support in the recorded decline in US bond yields. At the beginning of the week, the benchmark 10-year Treasury yields rose to the highest level since 2019 at 2.55%. It has since dropped to an intraday low of 2.33% on Wednesday. The lower yields have lowered the opportunity cost of holding the non-yielding asset.

As at the time of writing, the 10-year Treasury yields were at 2.35%. With the probable bounce back, silver price may continue to find resistance at $25.00.

At the same time, the US inflation data scheduled for release later on Thursday will likely weigh on silver price. February’s PCE index, which is the Fed’s preferred gauge of inflation, comes amid the central bank’s shift to a more aggressive tone on dealing with inflation.

Analysts and policy-makers alike are in favor of an interest rate hike by 50 basis points as a way to deal with the heightened inflationary pressures. Earlier in March, the Fed increased rates by 25 basis points; the first hike in over three years. An environment of higher interest rates is usually bearish for silver price.