Silver experiences short-term oscillation, but remains supported by weaker US dollar

• Silver has seen a pickup in volatility in recent trading despite the lack of fundamental catalysts.
• Looking through short-term price fluctuations, a weak US dollar has been supporting the precious metal on Tuesday.

Silver Spot (XAG / USD) has experienced an inexplicable spike in volatility since the US session opened at 14:30 GMT; Without warning, XAU / USD prices fell from $ 27.50 to just above $ 27.00, but have now fallen back to $ 27.30. Before the spike in volatility, silver markets had benefited from a decline in the US dollar. As it stands, XAG / USD is still trading with gains of around 0.4% or 10 cents on the day and a test of the previous session highs around $ 27.80 is likely if the dollar continues to decline. Silver bulls will expect the recent reflationary market context (which has benefited inflation-sensitive assets such as commodities and equity markets) to continue and may push the precious metal to the highs set earlier in the month. .

Since the beginning of the month, US 10-year equilibrium inflation expectations have recovered from around 2.1% to over 2.2% and this has supported “inflation hedges” such as precious metals. Inflationary impulses have weakened a bit Tuesday as markets take a breather from recent moves; The 10-year yields are slightly lower in line with a slight pullback from recent highs in the equity and crude oil markets.

But precious metals are gaining momentum elsewhere; As noted, the US dollar, with which precious metals typically have a negative correlation, is lagging behind. Also, real US bond yields are falling; The US 10-year TIPS yield fell about two and a half basis points Tuesday below -1.05%, very close to the all-time lows set on the first trading day of the year of just under – 1.10%.

US consumer price inflation data will be released on Wednesday, which if stronger than anticipated, could reinvigorate recent “reflationary” market flows, likely to benefit precious metals markets as long as possible. when Fed Chairman Jerome Powell, speaking later Wednesday night, stands his ground. to the Fed’s usual stance that policy will remain very accommodative and the Fed will look at any “transitory” spike in inflation in the coming months. Continued Fed moderation should keep real yields under pressure.

Technical Levels