- Silver continues to fall in sympathy with other precious metals as the US dollar recovers.
- For now, the XAG / USD remains above $ 26.00.
Silver Spot Prices (XAG / USD) They are under increased selling pressure and are now trading modestly above $ 26.00 from Asia Pacific highs near $ 27.00. It appears that in the precious metals space, gold is back in the lead, the yellow metal dipping below the key $ 1,800 level on Thursday and is down 2.3% or more than $ 40 on the day. The XAG / USD, meanwhile, is down 2.6% or around 75 cents.
Driving the day
The main factor driving the precious metals markets down on Thursday is a continued rally in the US dollar, with which precious metals tend to have a fairly strong negative relationship; the dollar index (DXY) It has rallied above 91.50 for the first time since Dec. 1 and the bulls will be targeting a test of the next key resistance area in the form of the September 2020 low at 91.70.
In terms of why the US dollar is recovering, it is difficult to identify any particular driver; Traders are talking about an ongoing short contraction, after short positions entered the year at historic extremes. Weakness is also cited elsewhere, such as in the euro; Some suggest that the weakness in the EUR / USD exchange rate may be partly explained by comparatively faster mass vaccination efforts in the US compared to the EU.
Others point to growing hopes for greater fiscal stimulus from the US Congress; On Wednesday, an adviser to the president of the United States, Joe Biden, told Politico that he expected a package of 1.3 trillion dollars to finally pass Congress. Negotiations are currently underway regarding how to restrict access to the next round of stimulus controls, and US Republican Senator Mitt Romney is reportedly set to reveal a plan to give $ 3,000 to parents. for each child as part of any stimulus package. Meanwhile, moderate Democratic Senator Joe Manchin (whose support for any eventual bill will be crucial if it passes in the Senate given the Democrat’s slim majority) indicated that he approved Biden’s $ 1.9 trillion stimulus plan.
The key point here is that stimulus is on its way one way or another, and markets seem to expect the price to be between $ 1.3 trillion and Biden’s proposal of $ 1.9 trillion. Most anticipate that further stimulus is likely to cause the US economy to accelerate in the second half of this year. Market participants appear to be betting that this will mean an outperformance in the US economy versus its developed market peers (USD positive) and could even result in the Fed having to adjust policy sooner than it suggests. the current guidance (an even higher positive USD).
If they both turn out like this, USD gains may have to run higher and bond yields (real and nominal) are going to go up much higher, not a good match for precious metals.
Technical Levels
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