XAG / USD gains are capped by the $ 26.00 level and the 21-day SMA

• Silver spot prices are now moving slightly lower on the day, having been briefly above the $ 26.00 level early in the session.
• ABN Amro reduces its forecast for the average silver price for 2021 due to a better US economic outlook.

The spot prices of the silver (XAG / USD) now moving slightly lower on the day, having trimmed the gains made during the Asian session that pushed spot prices to a high of $ 26.05 and briefly above the 21-day moving average, which is just below the psychological level of $ 26.00. At the time of writing, XAG / USD is trading at $ 25.70, down about 0.4% or 10 cents on the day, despite the broad weakness of the US dollar.

Sentiment analysis

The feeling is mixed on Thursday with US stock markets flat and European stocks mostly negative along with crude oil prices, while in currencies, the USD is on the defensive and bond yields are higher after the ECB. However, the ECB’s monetary policy decision, in addition to sounding a bit more aggressive on the PEPP and giving the EUR some punch, has shown few surprises and has not seemed to affect overall market sentiment too much. The central bank is willing to maintain ultra-accommodative monetary policy for the foreseeable future, as expected.

Meanwhile, generally better-than-anticipated US data has left no lasting impact on sentiment. Weekly US Initial Unemployment Claims were slightly better than expected at 900,000 (expectations were 910,000) and the previous week saw a sharp downward revision to 926,000 from 965,000. Therefore, the employment data was not as bad as expected, but it is still very high by historical standards and well above the average for the fourth quarter of 2020, a reflection of the worsening impact of the Covid-19 pandemic. Continuing with the US data, January’s Philadelphia Fed Manufacturing Index was stronger than expected, reaching 26.5 points, above expectations of 12 and rising from 9.1 in December. This bodes well for Friday’s US Markit Manufacturing PMI data.

Markets remain focused on broader macro issues, on which (as suggested by record highs in US stock indices, commodities near recent highs, and the USD retreating) markets appear to be on the favorable side.

Pandemic: Nerves persist over the worsening spread of the pandemic in Europe, the US and elsewhere. Countries are moving towards a tighter lockdown and, given fears about the international spread of new variants of the coronavirus, some of which are feared could be resistant to the immunity acquired by the vaccine, they are leading countries to shut down every its borders again (the UK may be cut off from Europe soon). Vaccine launches remain a broad counterbalance to these concerns, or are even positive for the market. Expectations are that some degree of herd immunity will have been acquired in the main developed markets by the summer. However, fears that 1) the new variants may be resistant to vaccine-induced immunity and 2) that the one-dose strategy being followed by some countries (notably the UK) is not as effective as expected, present a negative risk. However, vaccine manufacturers at the University of Oxford (makers of the AstraZeneca vaccine) are already mobilizing to adjust their vaccine to account for new variations of Covid-19.

Stimulus: Stimulus from major central banks, especially the Fed and the ECB, appears to be here to stay for some time, the key factor sustaining risk appetite and keeping real returns low. Hopes for further US fiscal stimulus have further supported risk appetite in recent weeks, but have not led to a substantial increase in US real yields (which may threaten appetite for risk). by risk). Low real yields keep precious metals markets propped up. Meanwhile, all of the aforementioned stimulus has been raising inflation expectations, also keeping precious metals markets propped up.

ABN Amro Silver Forecast

ABN Amro hopes that A significant improvement in US economic conditions will result in the Fed reducing its asset purchase program in 2022, leading to a stronger USD and higher nominal and real returns. This, they say, is negative for silver prices. The bank lowered its forecast for the average silver price for 2021 to $ 24.60 from $ 27.20, but they expect the precious metal to outperform gold in relative terms, given the more substantial industrial demand component for silver. “We expect a further recovery in the industrial sector so this will support silver prices,” they say.