Silver (XAG/USD) cools from 7-month high on profit taking, remains bullish

Boasting a remarkable gain of 5.38% yesterday, silver prices have retraced somewhat in today’s session, owing to natural profit-taking and better-than-expected US labor data. XAG/USD currently trades around ~34.55350 per troy ounce, down -0.60% for the day.

• Failing to find support around ~99.131, a weaker U.S. dollar (DXY) made way for massive silver gains in yesterday’s session, representing the metal’s best daily performance since October of last year
• Silver has retraced from its highs in today’s session as markets look to secure profits alongside a positive JOLTS report, beating consensus by 290,000 thousand job openings

Perhaps somewhat overshadowed by its yellow peer regarding performance and all-time highs in recent memory, yesterday’s session marks silver’s largest daily gain in over eight months, rising 5.38% in value compared to a more modest 2.80% gain for gold.

Looking to challenge previous highs made in October 2024, a trend of dollar weakness has allowed precious metals to rise in value, which are already pacing well for the year amid continued worries of global trade relations, geopolitical tensions, and uncertainty surrounding US monetary policy.

Markets now look ahead to speeches from various Fed policymakers in the next twenty-four hours and a rumoured phone call between Trump and Xi Jinping to discuss trade relations, as current negotiations prove unproductive.

With various conflicting signals from recent economic data points, the Fed is currently in an unenviable position ahead of its June 18th meeting.

While recent releases showing a declining GDP and lower inflation would typically support rate cuts, today’s JOLTs report shows the US Labour market is more buoyant than once thought, suggesting that rates should remain unchanged.

At least in part due to recent tariff announcements, the Fed remains cautious owing to fears of ‘stagflation’, in which both inflation and unemployment would remain high. Highlighting “heightened risks to both employment and inflation targets” as justification for leaving rates unchanged in their previous meeting, the Federal Reserve is now faced with the following dilemma:

1. Leave rates unchanged, prioritise an otherwise buoyant jobs market and low inflation, but risk further economic contraction
   
2. Cut rates, prioritise economic growth, but risk higher inflation and job market health

Under current circumstances, at least in some regard, both outcomes can be seen as supportive of silver pricing. While lower rates typically favour non-yielding assets like silver, leaving rates unchanged risks further economic slowdown, boosting market uncertainty, and, by extension, safe-haven flows into precious metals.

• As of June 3rd, silver has had its best year-to-date performance in over five years, aside from 2024. If it can break previous yearly highs around ~34.86900, silver will trade at its highest level since 2011 during the height of the Euro sovereign debt crisis
• If price remains above 33.02574, we can expect silver to stage a move higher. Bulls will first aim to take out previous highs, then aim towards $36 per troy ounce, representing the next level of daily resistance