Spot silver (XAG/USD) prices are trading higher this Monday in the $24.50 region, up about 1.0% or roughly 25 cents on the day, underpinned by uncertainty relating to the shifting the global geopolitical order following Russia’s invasion of Ukraine. The EU stance against Russia hardened significantly over the weekend.
Western countries will now ban some Russian banks from SWIFT, the CBR had a large portion of its forex reserves frozen and the EU will provide direct military aid to Ukraine after blocking its airspace to all Russian aircraft. There is considerable uncertainty as to how these measures might impact global growth and levels of uncertainty aren’t helped by the threatening tone of Russian President Vladimir Putin, who directed his nuclear deterrent forces to be on a state of heightened alert.
As traders digest recent developments as the Russo-Ukraine war rumbles on, its not really surprising to see safe-haven precious metals such as silver in demand. XAG/USD bulls will take comfort from the fact that the metal seems to be finding good support at its 200-Day Moving Average at $24.20. As global energy prices march higher on fears of Russia supply disruptions, demand for inflation protection is likely to remain elevated.
That, coupled with traders paring back their Fed, ECB and other major central bank tightening bets and the subsequent drop in global bond yields suggests XAG/USD’s trading bias this week may be tilted higher. Even though this week’s US data (official jobs report and ISM surveys) are likely to show a robust ongoing recovery and Fed speak is likely to reaffirm near-term tightening expectations, XAG/USD bulls will likely target last week’s $25.62 highs.