SILVER PRICE OUTLOOK:
- Silver prices fall modestly despite U.S. dollar softness.
- Traders remain cautious ahead of key U.S. labor market data.
- The September NFP report, due out on Friday, will be key for financial markets.
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Silver prices fell on Thursday despite U.S. dollar softness, as traders remained bearish on precious metals given the recent jump in nominal and real U.S. yields. In this context, XAG/USD dropped about 0.2% to $20.95 in late afternoon trading in New York, in a session characterized by moderate volatility on Wall Street ahead of a key risk event before the weekend: the release of the latest U.S. employment report.
The U.S. Department of Labor will unveil September nonfarm payroll data on Friday. According to the median estimate, U.S. employers added 170,000 jobs last month, after hiring 187,000 people in August. Separately, the household survey is expected to show that the unemployment rate ticked down to 3.7% from 3.8% previously, indicating persistent tightness in labor market conditions.
To gauge the near-term trajectory of silver, traders should focus on the strength or weakness of U.S. NFP figures. Should the official numbers surprise to the upside by a wide margin, the Fed’s outlook could become more hawkish, leading traders to increase bets in favor of another hike in 2023 and higher interest rates for longer. This scenario could boost the U.S. dollar and drag down silver prices.
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The opposite is also true. If the labor market disappoints and reveals cracks, traders are likely to unwind wagers of further policy firming on the assumption that the economy is about to roll off the cliff. As a result, we may observe lower U.S. Treasury yields and a softer U.S. dollar, both of which could bolster precious metals.
In terms of technical analysis, silver prices are sitting above an important support zone near $20.70 after the recent selloff. Protecting this critical floor is of utmost importance for the bulls; any failure to do so could potentially send XAG/USD tumbling toward $19.95. On further losses, sellers may be emboldened to initiate an assault on $18.80.
Conversely, if silver manages to stabilize and commence a rebound from its current position, initial resistance appears to be located at $22.30. Although a test of this region may lead to rejection, a bullish breakout could reignite upward momentum, paving the way for an advance toward $22.60, followed by $23.75.
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| Change in | Longs | Shorts | OI |
| Daily | 2% | -4% | 2% |
| Weekly | 14% | -21% | 11% |