- Silver remains capped below the $ 25.50 level as the real interest rate and inflation caps consolidate after big moves.
- The precious metal appears to have carved out a new short-term range between $ 25.10 and $ 25.70.
The spot prices of the silver (XAG / USD) have again fallen below the $ 25.50 level since the start of the European session on Wednesday, and the most recent attempt to break above this level again during the American session appears to have failed. At the time of writing, the white metal loses about 0.6% or just over 15 cents on the day and it is the most lagging among the four major precious metals (XAU / USD, XPD / USD y XPT / USD).
Despite the minor hit that silver prices have suffered on Wednesday, precious metals are practically unchanged during the week and they have enjoyed a solid recovery of almost $ 1 from the lows set in the early part of the Asian session on Monday. Changes in sentiment towards the dollar have been one of the main drivers of prices of silver this week, as well as movements in real interest rates and the breakeven points of inflation.
Other drivers of the precious metals market this week
Another crucial determinant of the short-term direction of the precious metals markets remains what happens in the US bond markets. Recent and more consolidated trade of the past two days is in line with a stabilization in real US yields. 10-year bonds have retreated slightly to closer to 2.03% from early-week highs for above 2.07%.
As a reminder, higher real returns are detrimental to precious metals markets (as yields rise, the incentive to shift equity weighting from gold and silver to bonds increases), while higher inflation expectations are positive (since precious metals are considered the ultimate hedge against inflation).
Initially, real returns had risen in anticipation of many more debt issues by the US government under Biden, as well as more and more market participants signing up for the “Fed tightening rumors,” that is, a build-up of expectations that as the US economy will begin to flourish in the second half of 2021, the Fed could be tempted to reduce its QE program (which keeps government yields artificially pressured) faster than expected. However, what has contributed to the recent stabilization of real yields and the fall in nominal yields over the past day has been a host of speeches from the Fed that have been more interested in emphasizing that the central bank is not thinking of changing the policy, or even withdrawing the stimulus, at any time.
Markets are unfazed by the US CPI figures.
Given the rebound in inflation expectations over the last few weeks, more attention than usual was paid to the release of CPI data on Wednesday. Headline inflation was slightly stronger than expected in year-on-year terms, reaching 1.4% (versus expectations for a 1.3% reading). Core CPI measures were in line with expectations (1.6% year-on-year). Lower energy prices continue to drag the headline CPI down, but given the recent surge in crude oil prices, they are expected to support it in the future. Of course, the figures are retrospective, and the data was collected at a time when the Covid-19 pandemic was continuing to worsen in the U.S. Once the economy can reopen a bit more normally, this should also present some risks to the hike for costs. But this rise in inflation is unlikely to manifest itself for at least a few more months.
XAG / USD establishes a short-term range
XAG / USD prices found decent support around the $ 25.10 area, which was Tuesday’s low, and appears to have created what could become a sort of short-term range, with the aforementioned $ 25.10 area acting up. as support and Wednesday’s highs just below $ 25.70 acting as resistance.