Silver bulls gasp below $ 27.50 ahead of key risk events

• Silver spot prices continue to rise but are struggling to break above $ 27.50.
• Traders remain cautious ahead of key events this week.

Silver Spot Prices (XAG / USD) They remain solidly higher for the week, but the bullish momentum eases a bit, with prices rising just 0.2% or around 7 cents on Tuesday. $ 27.50 has proven to be a solid area of ​​resistance, and spot prices have failed to convincingly break above the level multiple times since Monday’s European session. XAG / USD is currently trading at $ 27.30, but perhaps the caution shown in the market on Tuesday is justified given key incoming risk events, including Tuesday’s Senate elections in Georgia, the FOMC Minutes on Wednesday of the December 15-16 rate decision and the NFP figures on Friday.

Incoming milestones

The main event of the week from a financial market perspective will be the second round of the Senate on Tuesday and the special elections in Georgia. As a reminder, there are two seats up for grabs in the state and they will decide who controls the majority in the Senate. Democrats need to win both seats if they want to win a majority in the Senate and thus have control over Congress, while Republicans only need to win one seat to maintain their majority.

The election, of course, will have crucial implications for the Biden Administration’s ability to implement its agenda; If Democrats can win both seats, thereby gaining a majority in the Senate and control over Congress, then the incoming Biden Administration and the Democratic Party will be able to seek significant additional fiscal stimulus in 2021 (very relevant to precious metals markets). , as well. as likely to be able to implement stricter regulation on large technologies and the energy sector (less relevant for precious metals).

How markets might react to a surprise Democratic victory is hotly debated; Some believe that the prospect of increased fiscal stimulus and the consequent boost in economic output will trigger a risk in (stocks, industrial commodities, energy and precious metals on the rise, bonds and the USD on the decline). Some argue that the prospect of stricter regulations could trigger a drop in stocks. Most agree that a Democratic victory will lead to higher nominal yields on US bonds. What happens to real returns will matter most to the precious metals markets and will depend on how much the Fed is willing to step in to keep financial conditions accommodative despite increased government borrowing and upward pressure on yields.

On the other hand, another point of political focus will be the congressional certification of the 2020 presidential elections on January 6 at 18:00 GMT. Joe Biden won 306 votes in the electoral college in the November 3 election compared to 232 for Donald Trump. The process is not expected to go as well as it normally would; At least 12 Republicans in the Senate and two-thirds of Republicans in the House are expected to challenge the outcome of the election. These challenges are not expected to be successful and once the Congressional circus is out of the way, the spotlight will turn to Biden’s inauguration on January 20.

Data

Meanwhile, a large amount of American data is also in focus. ISM Manufacturing PMI figures were released recently and were much stronger than expected; the general index rose to 60.7, well above expectations of 56.6 and 57.5 last month. Meanwhile, the subscripts were also strong across the board; Prices paid rose to 77.6 versus expectations of an increase to 65.7 from 65.4 last month, its highest number in nearly three years, while new orders and employment were also strong. The data should only add more advantages to the recent rise in inflation expectations, which should be distinctly bullish for precious metals like silver.

Looking ahead to the rest of the week, ISM services data will be released on Thursday and is likely to show a bit more weakness given the increased exposure of service jobs to locks, while NFP figures will be released on Thursday. Friday.