Silver falls below $ 26.00 amid technical selling, despite lack of fundamental catalysts

• Spot silver recently fell back below $ 26.00 amid technical selling on the break of support.
• There does not appear to be any fundamental justification for the drop, with markets cautious ahead of Wednesday’s FOMC.

Silver Spot Prices (XAG / USD) They have lagged behind in recent operations, amid what appears to be a technical sales attack more than anything else; XAU / USD prices recently fell below the $ 26.00 support, having failed earlier in Tuesday’s session to break above Monday’s highs of $ 26.30. The bears appear to have been targeting a move towards this week’s lows at $ 25.80, although they just missed this and XAG / USD is currently consolidating below $ 26.00 at $ 25.90.

Other than technical selling, there doesn’t seem to be much more justification for why silver is lagging behind; US government bond yields are slightly lower and the US dollar is stable; generally, with moderate conditions in these two markets, precious metals would also be moderate. Meanwhile, markets appear to have ignored the weaker-than-expected February US industrial production and retail sales reports on Tuesday. Market participants appear to be keeping the powder dry ahead of Wednesday’s FOMC meeting. As of now, spot silver is trading down 1.2% or losing more than 30 cents on the day.

US Retail Sales Data Summary.

Retail sales in the United States fell 3.0% month-on-month in February, reflecting the fading of the impact of the $ 600 stimulus checks each American received in January. Keep in mind that, in January, top retail sales soared 7.6% more for the month, meaning that, amid the 3.0% month-on-month drop in retail spending in February, US consumers have only partially reduced its high cost. This pullback in spending is unlikely to last long, given that Americans are now in the process of receiving another even bigger check from the government (this time for $ 1,400). History may repeat itself in March with another huge jump in the month-on-month retail sales growth rate.

While the fading of the stimulus impact played a key role, the decline in the month-on-month rate of overall retail sales growth can also be largely explained by a large 2.3% upward revision to the January figure, which was revised from 5.3% to 7.6%. Harsh winter conditions also affected consumer spending activity (remember that the Texas economy was practically shut down for nearly two weeks when cold weather destroyed power grids).

“Given that the new fiscal stimulus is likely to drive a large spike in spending in March, we still estimate that real consumption growth will accelerate to nearly 10% annualized in the first quarter,” says Capital Economics, before concluding that “As accelerated launch allows for a widespread reopening of the economy in the coming months, we expect second-quarter consumer growth to be even stronger.”