• XAG/USD jumped above $22.70, posting a gain of over 0.80% and is poised to close out a winning week.
  • Core PCE fell to 4.6% year-on-year in May, less than expected.
  • USD and US bond yields retreated after the data.

XAG/USD crossed the $22.70 mark on Friday, gaining more than 0.80%. This positive momentum positions it for a week of gains after two weeks of losses. Increase in silver prices can be explained by the release of soft US Core Personal Consumption Expenditures (PCE) data for May, which revealed a year-on-year decline in May to 4.6%, missing expectations. As a result, US dollar and US bond yields retreated in favor of the precious metal in response to the data.

USD weakens after soft Core PCE numbers

U.S. core personal consumption expenditures (PCE), which measures the amount of money consumers spend in a month excluding seasonally volatile items such as food and energy, fell in May. In May, that figure slowed from 4.7% to 4.6% year-on-year, while the headline rate fell from 4.6% to 3.8%.

In response, the DXY fell from 103.55 to 102.90, while US bond yields, which could be seen as an opportunity cost of holding unprofitable precious metals, retreated from daily highs. Along those lines, the 2-year Treasury yield peaked at 4.93%, hitting its highest level since March 9, before pulling back to 4.85%. In addition, the 5-year and 10-year rates fell, with the former falling to 4.13% and the latter falling to 3.83%.

Attention now shifts to next week’s US labor market data, including ADP, Jobless Claims on Thursday and the Nonfarm Payrolls report on Friday.

XAG/USD levels to watch

On the daily chart, XAG/USD appears bearish in the short term. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in the negative, indicating that sellers have the upper hand. Additionally, traders should watch out for a bearish cross made by the 20-day and 100-day simple moving average (SMA) of $23.35, which could support further downside.

On the downside, support levels to watch rose to the 200-day SMA at $22.53, followed by $22.30 and the June lows at $22.15. On the downside, resistances are seen at $23.00 followed by $23.10 and the aforementioned SMA convergence at $23.35.

XAG/USD Daily Chart

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