Silver rebounded more than 2% to above $75, but the real test is yet to come.
2026-05-20 17:22:30
On Wednesday (May 20), during the European trading session, silver prices rebounded by more than 2%, trading around $75.47. However, due to market expectations that the Federal Reserve will raise benchmark lending rates this year and the yields on US Treasury bonds remaining firm, the outlook for silver prices remains bearish.
On Tuesday, the 10-year US Treasury yield touched 4.682%, a new high in over a year; the 30-year US Treasury yield jumped to around 5.2%, the highest level since the subprime mortgage crisis. This means that long-term borrowing costs have returned to such high levels for the first time since the eve of the 2007 global financial crisis. Holding government bonds provides stable interest income, while holding silver not only offers no interest but also incurs storage and insurance costs. Therefore, when government bond yields rise, the attractiveness of silver relatively decreases.
Because when investors can obtain a stable annualized return of nearly 5% from "risk-free" assets such as US Treasury bonds, the opportunity cost of holding silver rises sharply—holding silver not only fails to generate interest but also incurs storage and insurance costs. Given the current multi-year highs in US Treasury yields, institutional investors often reduce their holdings of non-interest-bearing assets like silver, reallocating funds to higher-yielding fixed-income products. This asset rebalancing is one of the key drivers behind the recent decline in silver prices. Furthermore, the rise of the 30-year US Treasury yield to the psychological threshold of 5.2% has further reinforced market expectations of a "higher and longer" interest rate environment, posing a sustained fundamental constraint on silver's medium-term trend.
The CME FedWatch tool shows that the market now expects at least one rate hike by the Federal Reserve this year, up to 56.3%, a stark reversal from the two rate cuts widely anticipated before the US-Iran conflict. This rapid shift caught many market participants off guard—just this February, traders were generally betting on two to three rate cuts this year; now, not only have these cut expectations completely disappeared, but rate hikes have evolved from a tail risk to the baseline scenario. Swap market data shows that traders now expect over 80% of the Fed to raise rates by the end of 2026, a significant surge from 30% a month ago.
The core reason for the sharp shift in market expectations is the continued rise in inflationary pressures. With high oil prices driving US inflation faster than ever, bets on a dovish Federal Reserve policy have been squeezed out. Last week's US April CPI data showed that overall inflation accelerated to 3.8% year-on-year, the highest level in nearly three years. Structurally, soaring energy prices were the main driver of this inflationary rebound—energy commodity inflation surged 29.2% year-on-year in April, with gasoline prices rising 28.4% year-on-year. Core CPI, excluding food and energy, also climbed to 2.8%, exceeding market expectations.
Rising U.S. Treasury yields also boosted the dollar. During European trading hours, the dollar index, which measures the dollar against six major currencies, touched 99.47, a six-week high. The continued strength of the dollar index is mainly due to the solidified market expectation of the Federal Reserve maintaining "high interest rates for longer"—the market has now priced in a rate hike before the end of 2026 to over 80%, coupled with risk aversion fueled by rising geopolitical risks in the Middle East, which has provided strong support for the dollar.
From a market structure perspective, the strong performance of the US dollar and the rise in US Treasury yields have created a positive cycle. Higher US Treasury yields increase the attractiveness of dollar-denominated assets, attracting global capital inflows into the US market and further pushing up the dollar's exchange rate. Currently, the US dollar index has closed positive for several consecutive days, with short-term moving averages showing a bullish alignment, maintaining a bullish technical outlook.
Investors are awaiting the release of the minutes from the Federal Open Market Committee's April policy meeting at 2:00 a.m. Beijing time on Thursday for further clues about the outlook for U.S. interest rates.
From a daily chart perspective, silver is currently trading around $75.40. The short-term moving averages MA20 ($77.38) and MA50 ($76.28) are both above the current price, forming significant short-term resistance. The long-term moving average MA100 ($81.21) is significantly higher than the current price, while the MA200 ($65.36) is far below. This arrangement of "short-term moving averages above price" suggests that silver is in a short-term pullback phase, but the long-term upward trend has not yet been completely broken.
(Spot silver daily chart, source: EasyForex)
The RSI is hovering around 46, below the 50 midline, indicating weak bullish momentum. Any rebound may encounter selling pressure at the nearby resistance level at any time.
At 17:15 Beijing time on May 20, spot silver was trading at $75.18 per ounce.
In summary, although silver has experienced a technical rebound from its lows, the fundamental environment remains unfavorable: soaring US Treasury yields, rising expectations of a Fed rate hike, and a strengthening US dollar are three major negative factors collectively suppressing silver prices. Technically, prices remain below the 20-day moving average, and the RSI is below 50, indicating insufficient upward momentum. Investors are awaiting guidance from the FOMC meeting minutes.
US Treasury yields surge: 10-year yield hits a more than one-year high, 30-year yield surpasses post-subprime crisis high.
On Tuesday, the 10-year US Treasury yield touched 4.682%, a new high in over a year; the 30-year US Treasury yield jumped to around 5.2%, the highest level since the subprime mortgage crisis. This means that long-term borrowing costs have returned to such high levels for the first time since the eve of the 2007 global financial crisis. Holding government bonds provides stable interest income, while holding silver not only offers no interest but also incurs storage and insurance costs. Therefore, when government bond yields rise, the attractiveness of silver relatively decreases.
Because when investors can obtain a stable annualized return of nearly 5% from "risk-free" assets such as US Treasury bonds, the opportunity cost of holding silver rises sharply—holding silver not only fails to generate interest but also incurs storage and insurance costs. Given the current multi-year highs in US Treasury yields, institutional investors often reduce their holdings of non-interest-bearing assets like silver, reallocating funds to higher-yielding fixed-income products. This asset rebalancing is one of the key drivers behind the recent decline in silver prices. Furthermore, the rise of the 30-year US Treasury yield to the psychological threshold of 5.2% has further reinforced market expectations of a "higher and longer" interest rate environment, posing a sustained fundamental constraint on silver's medium-term trend.
Interest rate hike expectations are rising: the probability of at least one rate hike this year has reached 56.3%, reversing pre-war expectations of rate cuts.
The CME FedWatch tool shows that the market now expects at least one rate hike by the Federal Reserve this year, up to 56.3%, a stark reversal from the two rate cuts widely anticipated before the US-Iran conflict. This rapid shift caught many market participants off guard—just this February, traders were generally betting on two to three rate cuts this year; now, not only have these cut expectations completely disappeared, but rate hikes have evolved from a tail risk to the baseline scenario. Swap market data shows that traders now expect over 80% of the Fed to raise rates by the end of 2026, a significant surge from 30% a month ago.
The core reason for the sharp shift in market expectations is the continued rise in inflationary pressures. With high oil prices driving US inflation faster than ever, bets on a dovish Federal Reserve policy have been squeezed out. Last week's US April CPI data showed that overall inflation accelerated to 3.8% year-on-year, the highest level in nearly three years. Structurally, soaring energy prices were the main driver of this inflationary rebound—energy commodity inflation surged 29.2% year-on-year in April, with gasoline prices rising 28.4% year-on-year. Core CPI, excluding food and energy, also climbed to 2.8%, exceeding market expectations.
A stronger dollar further pressured silver prices.
Rising U.S. Treasury yields also boosted the dollar. During European trading hours, the dollar index, which measures the dollar against six major currencies, touched 99.47, a six-week high. The continued strength of the dollar index is mainly due to the solidified market expectation of the Federal Reserve maintaining "high interest rates for longer"—the market has now priced in a rate hike before the end of 2026 to over 80%, coupled with risk aversion fueled by rising geopolitical risks in the Middle East, which has provided strong support for the dollar.
From a market structure perspective, the strong performance of the US dollar and the rise in US Treasury yields have created a positive cycle. Higher US Treasury yields increase the attractiveness of dollar-denominated assets, attracting global capital inflows into the US market and further pushing up the dollar's exchange rate. Currently, the US dollar index has closed positive for several consecutive days, with short-term moving averages showing a bullish alignment, maintaining a bullish technical outlook.
Market Focus: FOMC Meeting Minutes to be Released Soon
Investors are awaiting the release of the minutes from the Federal Open Market Committee's April policy meeting at 2:00 a.m. Beijing time on Thursday for further clues about the outlook for U.S. interest rates.
Moving average resistance, RSI is weak
From a daily chart perspective, silver is currently trading around $75.40. The short-term moving averages MA20 ($77.38) and MA50 ($76.28) are both above the current price, forming significant short-term resistance. The long-term moving average MA100 ($81.21) is significantly higher than the current price, while the MA200 ($65.36) is far below. This arrangement of "short-term moving averages above price" suggests that silver is in a short-term pullback phase, but the long-term upward trend has not yet been completely broken.
(Spot silver daily chart, source: EasyForex)
The RSI is hovering around 46, below the 50 midline, indicating weak bullish momentum. Any rebound may encounter selling pressure at the nearby resistance level at any time.
At 17:15 Beijing time on May 20, spot silver was trading at $75.18 per ounce.
With a bearish fundamental outlook and technical pressures, the rebound in silver prices is unlikely to be sustained.
In summary, although silver has experienced a technical rebound from its lows, the fundamental environment remains unfavorable: soaring US Treasury yields, rising expectations of a Fed rate hike, and a strengthening US dollar are three major negative factors collectively suppressing silver prices. Technically, prices remain below the 20-day moving average, and the RSI is below 50, indicating insufficient upward momentum. Investors are awaiting guidance from the FOMC meeting minutes.
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