The Fed meeting will be a focus next week. However, geopolitics will continue to drive price action.
Spot Silver (XAG/USD), prices are still below $26.00 and within Thursday’s intraday ranges despite weakness US Equities as investors express doubts about earlier comments by Russian President Vladimir Putin alluding positive developments in negotiations with Ukraine. As Russian forces move slowly towards key Ukrainian cities, including Kyiv, and as Western officials raise alarm about possible Russian use of chemical/biological weaponry, the situation on the ground is still tense.
The West continues to impose sanctions on Russia. On Friday, the G7 moved to remove Russia from its preferred nation trading status. They also pushed to restrict Russian access to IMF or World Bank funds. The possibility of further negative headlines is likely to keep XAG/USD prices well supported above earlier sessions/weekly lows around $25.30-25.40 before Friday’s close. Silver has seen selling pressure close to $26.00 due to hopes of progress in Russia/Ukraine negotiations following earlier positive comments from Putin.
Geopolitics will not be the only driver silver traders need to pay attention to next week. On Wednesday, the Fed will increase interest rates by 25bps. Investors will be more interested in the tone of the statement and the comments made by Fed Chair Jerome Powell during his post-meeting conference.
This week’s US inflation reading of February was hot. Traders priced in Fed tightening. However, near-term inflation is expected to rise due to recent commodity price actions and the Fed must now deal with a new major downside risk to US growth. Short-term real rates are unlikely to move from deeply negative territory for a while. This means that XAG/USD is likely to ride a bumpy road but it has a good chance of returning to the $27.00 level in the next few days/weeks.
