Silver rises returning above $ 25.00 as USD and bond yields fall

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  • XAG / USD rose further on Tuesday and returned above $ 25.00 amid softer USD and lower yields.
  • The fundamental catalysts have been light, and the IMF’s upbeat new world economic forecasts have been the main story of the day.

Silver Spot (XAG / USD) it rose on Tuesday, with the precious metal now rebounding above $ 25.00 and looking to climb towards its 21-day moving average just above $ 25.40. The $ 25.40 area is a key resistance zone, also acting as the March 12-22 lows and March 24 highs. The continued weakness of the US dollar and falling US government bond yields (10-year yields fell just over 3bp in the session to retreat below 1.70% again) are the main factors supporting precious metals. On the day, the XAG / USD was up around 30 cents or around 1.2%.

Performance of the day

So far it has been a fairly quiet session in terms of new fundamental catalysts; there have been no releases of level one or even level two data in the US or outside the euro zone. The main update from an economic point of view is probably the IMF’s updated version of the world economic outlook; The group raised its global growth outlook to 6.0% in 2021 from 5.5% in its previous January outlook, while it also raised its growth outlook for 2022 to 4.4% from 4.2% in January. This would mark the strongest global growth pace since 1976 and is led by a strong rebound in the U.S. In fact, the IMF raised its growth outlook for the U.S. economy to 6.4% from the previous 5.1%, the pace of fastest growth seen in the US since the 1980s. The IMF noted that the multi-speed recovery seen in economies reflects the different pace of vaccine delivery and cautioned that there is still a high degree of uncertainty on the economic outlook, and a lot depends on the success of the Covid-19 vaccine launches.

As far as precious metals markets are concerned, the high global economic growth environment that the global economy is currently in, setting aside short-term difficulties related to the recent resurgence of Covid-19 cases in various key economies (like India, Brazil and the EU), it’s not a great environment. Having seen a sharp recession in 2020 as a result of the first wave of Covid-19 infections, the global economy is still at the beginning of its growth cycle. That means the global central bank moderation has probably peaked (for now) and global government bond yields are likely to be in a higher one-way gear, a downside for underperforming precious metals ( which become a less attractive asset to hold as returns increase). above). Furthermore, with the US currently leading the global economic rebound and is expected to continue to do so in 2022, this bodes well for the US dollar and therefore bodes ill for precious metals such as gold and gold. silver, which 1) generally have a negative correlation with the USD and 2) are denominated in USD, so when the USD appreciates, it becomes more expensive for international buyers.

Elsewhere, momentum appears to be building toward an OECD / G20 agreement on a global minimum corporate tax rate. The United States, which is seeking to increase the corporate tax rate domestically and does not want to give up too much competitive advantage, is enthusiastically pushing for a deal and major European countries (France and Germany) appear to agree. The current move toward higher corporate taxes is of course negative for equities, but the strong global growth environment highlighted by the IMF earlier in the session appears to offset any tax-related negativity; Global stocks continue to trade near recent (or all-time) highs – buoyant risk appetite is not helpful for safe-haven assets like gold and silver.

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