- Silver spot prices are slightly lower on the day, after Monday’s solid gains, but remain above $ 26.00.
- Prices appear to be consolidating within a pennant formation, which could be subject to a breakout soon.
Silver Spot Prices (XAG / USD) They continue to gradually decline from the highs of the Asia Pacific session on Monday near $ 26.80, reaching lows during the early part of the European morning on Tuesday at the level of $ 26.00. The psychological round level has been maintained for now; XAG / USD is currently consolidating just above $ 26.00 and is trading at losses of around 0.5% or more than 10 cents on the day.
USD decline picks up momentum, supporting precious metals
The US Dollar Index (DXY), which recently fell below the 90.00 level and past Monday’s low of 89.98 to reach its lowest levels since December 18, is now posting losses of just over 0.4% on the day. or just under 40 points. Given the negative correlation between the dollar and precious metals, the weakness of the USD should maintain a bottom below XAG / USD.
In terms of why the USD is on the defensive, the risk appetite! The S&P 500, Dow Jones Industrial Average and Nasdaq Composite indices just opened at record highs as major US indices continue to gain momentum following the signing of the aid package by US President Donald Trump. Covid-19 of 900 $ B and 1.5 $ T. The overhead package was signed into law earlier in the week and the fact that there is still some uncertainty as to whether or not Congress could also approve an additional $ 1,400 in direct payments to each American, raising the total amount of the check from stimulus to $ 2000.
Both Trump and Democrats support this and the Democratic-controlled House of Representatives has already voted in favor of the bill. Whether the Senate will do so is unclear, with prominent Republicans against more aid, although enough Republicans may feel the pressure to vote for more stimulus to please the public in the Georgia Senate second-round election on May 5. January (which will decide whether Democrats or Republicans control the White House). If this additional help is approved, it is likely to be seen as an additional positive for risk appetite and could propel US equities higher and lower the US dollar.
This at first glance could be seen as positive. But it will be important to watch the signals from the bond market; If the $ 1,400 in additional direct payments is agreed to for each American, then US bond yields could see a further increase (on Tuesday, the 10-year yield rose 1bp to 0.943%). Analysts are aware of a move above 1.0% that has remained elusive so far in the fourth quarter of 2020.
If increasing nominal returns results in increased real returns, this is likely to be negative for precious metals markets (the better the inflation-adjusted return on investing in bonds, the less the incentive to hold precious metals without yield). Currently, the US 10-year TIPS yield is at -1.04%, close to the summer lows of around -1.1%.
Looking ahead to the rest of the week, what happens to the US fiscal stimulus will continue to be the main driver for the US dollar markets and probably precious metals as well.
XAG / USD consolidates within the pennant
XAG / USD appears to be consolidating within a pennant structure; To the upside, a downtrend linking December 21 and this week’s highs is limiting price action and, upward, an uptrend linking the lows of December 14, 22, 23, and 24 is supporting the stock of the price. A breakout to the upside, which looks more likely that if the USD continues to decline and DXY hits new yearly lows below 89.70, it would need to see momentum above $ 26.50 and past weekly highs just under $ 26.80. This would open the door for a bullish move towards last Monday’s high of just under $ 24.50.
Meanwhile, a break down to the downside would need to see a push below the $ 26.00 level and around $ 25.80, and would open the door for a downward move towards $ 25.00 and the precious metal’s 21- and 50-day moving averages. just below it at $ 24.71 and $ 24.42 respectively.
4 hour chart
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