Silver returns to session highs above $ 26.50, up more than 3.0% on the day

• XAG / USD has returned above $ 26.50 in recent trading and anticipates a test of daily highs near 26.80.
• News that Trump signed the $ 2.4 trillion US stimulus bill has given a boost to risk appetite and precious metals.

Silver spot prices (XAG / USD) are substantially higher on the first trading day of the last week of the year. Volumes are tight and many market participants, particularly in Europe and North America, are still far from the Christmas and New Years celebrations, although fundamental developments are keeping investors on their toes. XAG / USD is currently trading with gains of more than 3.0% on the day; The precious metal rallied above $ 26.00 during early Asia Pacific trading to hit highs just below $ 26.80, only to then slide back to $ 26.00 again before the bulls bought on the dips and pushed the pair. above $ 26.50 recently.

Silver responds positively to US stimulus

Risk appetite looks broadly favorable Monday; US President Donald Trump abruptly changed his tact on the stimulus over the weekend, abandoning his threat to veto the $ 900 B bill’s Covid-19 aid package and speech package. 1.4 $ T bus and, instead, chose to convert the bills into law. Elsewhere, investors are still taking in the news that the UK and the EU have managed to reach an agreement on a free trade agreement (meaning the much-feared no-deal outcome has been averted) and that the they are carrying out mass vaccines in the EU. Additionally, the Astra Zeneca / Oxford University vaccine is expected to receive UK approval soon, further accelerating mass vaccinations in the country.

The result is that stocks are vastly higher, US bonds are lower (also reflecting expectations of more supply as the government issues debt to finance its stimulus), and the crude oil, industrial metals, and metals markets. precious are vastly higher. The USD is also slightly weaker on the day, although currency market conditions have been a bit more choppy.

More specifically for the precious metals markets; Initially, markets appeared to be confused as to whether news that the US government will boost the US economy with more deficit-funded spending would ultimately be a positive or negative precious metal; Precious metals bears could argue that the stimulus is positive for precious metals as it creates risk in (gains in equity markets), which will undermine demand for safe havens (such as XAG / USD) and that government debt Additional will raise US bond yields by reducing the incentive to hold precious metals versus fixed income investments.

However, the bulls (who appear to be in control on Monday) could argue that 1) deficit government spending is likely to continue to be largely financed by the Fed and the combination of continued fiscal and monetary stimulus is inflationary (which benefits inflation hedges such as precious metals) and 2) although nominal returns could increase as a result of increased government borrowing, rising inflation expectations are likely to keep real returns under control: TIPS yield at 10 US years remains close to recent lows around -1.04% and 5-year equilibrium inflation expectations are moving towards new yearly highs around 1.94%.

Some analysts have argued that risk appetite alone will not be enough to deal a significant blow to precious metals; what will be needed is a combination of higher real returns and lower inflation expectations.