• Silver is subdued at the start of the week in the $24.60s as traders weigh geopolitical developments and Fed rhetoric.
• The former is acting as a tailwind as calls grow for the EU to ban Russian energy imports.
• The latter is a headwind as rhetoric turns increasingly hawkish, keeping upside risks to USD and US yields alive.

Its been a subdued start to the week for spot silver (XAG/USD) as markets weigh developments in the Russo-Ukraine war and recent commentary from Fed policymakers and what that means for the outlook of the world’s most important central bank. XAG/USD trades a modest 0.3% higher on the day in the $24.60s. On the one hand, Eurozone bond yields are seeing a pullback and the euro is weaker as international pressure builds on the EU to embargo Russian energy imports as evidence emerges of war crimes committed by Russian forces in Ukraine. This has sparked a mild bid for safe-haven assets at the start of the week like bonds and the US dollar, which is also likely helping support precious metals.

However, precious metal markets are also having to contend with the tailwind of increasingly hawkish rhetoric coming from Fed policymakers ahead of the highly anticipated May meeting where a 50 bps rate hike is seen as now all but a certainty. There is also plenty of focus on what the Fed’s quantitative tightening programme could look like after influential FOMC member John Williams said that it could be kicked off in May. The release of the minutes of the last Fed meeting on Wednesday should shed some light on the possibilities.

Hawkish Fed vibes keep upside risks to the US dollar and US yields alive, a downside risks to the likes of XAG/USD. Firstly, a stronger US dollar makes the purchase of dollar-denominated silver more expensive for the holder’s of international currencies and, secondly, higher yields increase the “opportunity cost” of holding non-yielding assets. If the buck does break higher and yields do start tracking higher once more, XAG/USD could be looking at a break lower towards support in the form of last week’s lows near $24.00 per troy ounce from current levels in the $24.70 area.