- Real 10-year US bond yields are back below -1.0%, giving a boost to the precious metals markets.
- Subsequently, spot silver rose to the $ 24.50 level from below $ 24.00 on Monday.
Silver Spot (XAG / USD) has been trading higher so far on Tuesday, and prices are currently trading near the highs for the day, just above $ 24.50. Currently, the XAG / USD is trading with gains of around 60 cents or more than 2.5% on the day.
Falling Real Yields Keep Precious Metals Supported
After rebounding to nearly -0.95% on Monday, the US 10-year TIPS yield has slumped to -1.0% and is currently near lows since mid-September. For context, the decline in real US yields (since the beginning of the year, US 10-year TIPS yields have fallen by approximately 0.0% to current levels of around -1.0 %) have been identified as a key driver of precious metals; The lower the real rate of return on bond investments, the more attractive it will be, comparatively, to invest in precious metals with no yield.
Compounding gains for precious metals, the downward move in real yields on Tuesday is being driven by rising inflation expectations, not falling nominal yields; the US 10-year equilibrium inflation rate has risen again to monthly highs close to 1.88% (implying that expectations are that the CPI will average 1.88% over the next 10 years) , an increase of more than 3 basis points from last Friday. This appeals to the safe haven property of precious metals that are a hedge against future inflation. If inflation expectations continue to rise and real returns continue to decline in 2021, precious metals should remain supported.
Silver eyes break key long-term downtrend
XAG / USD is currently probing for a key downtrend linking August 7, September 11, November 9, and December 8 highs, which appears to have come into play around $ 24.50. Should it lose this level, that would open the door for a test of the monthly high at $ 24.80 and, beyond that, a break above $ 25.00 and a move towards $ 26.00 that coincides with the November high.
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