- Risk aversion during early Monday morning saw a bid from the USD and sent silver towards $ 23.50.
- But the USD has since waned, allowing XAG / USD to rally and break past monthly highs modestly above $ 24.40.
Silver Spot Prices (XAG / USD) they were hit hard during the early part of European trade on Monday; The USD posted strong safe-haven demand amid mounting Brexit concerns, enough to send the dollar index briefly above 91.00 and as high as 91.24. This strength in the USD weighed heavily on the precious metals markets and sent XAG / USD from open levels for the week just below $ 24.20 to $ 23.50.
However, since then the USD has reversed most of Monday’s initial strength, allowing for a broad rally for precious metals in line with overall risk appetite. That has allowed spot silver to rally not just to Monday’s levels, but above and to new monthly highs above $ 24.50. As things stand right now, precious metals are trading around 35 cents on the day or 1.5%.
USD bears / precious metals bulls rise again
The USD rally during the European morning session was driven by USD bears eager to secure their gains and DXY is now trading lower again and at 90.60, just above last week’s lows just below. from 90.50. Although negative flows from the GBP as a result of the adverse Brexit news could provide some support for the USD, most analysts agree that market conditions remain generally negative for the USD.
More specifically, with inflation expectations rising again globally as hopes rise for a better world economy in 2021 and beyond (amid the end of the pandemic due to vaccines and a return to ‘normalcy’ with respect to international trade and relations under the Biden administration), real US interest rates (nominal interest rates – expected inflation rate) have fallen again, undermining the attractiveness of the USD against your pair.
Importantly, the low real interest rates on US dollar debt investments make precious metals particularly attractive, and since the Fed wants to keep interest rates highly flexible for the foreseeable future, this is unlikely. Support will go nowhere anytime soon.
That means that while risk in the news (vaccine updates and a possible deal on US fiscal stimulus) could put silver and gold on the back foot, buyers are likely in the dips. They remain. In fact, it could be argued that both factors could be considered bullish for precious metals anyway, as they raise inflation expectations, further compressing real interest rates.
XAG / USD rises above recent ranges
Silver spot prices have convincingly broken up from their range that had prevailed so far during December. Before Monday morning, earnings had been mostly limited to around $ 24.30. But since it rallied strongly from the December 2 low of $ 23.55, the precious metal has broken through this resistance and even surpassed the November 20 high of $ 24.53.
On the downside, the previous high of the old December range at around $ 24.30 should offer strong resistance, as should its recently broken 21 and 50-day moving averages at $ 24.00 and $ 24.12 respectively.
To the upside, the main resistance area to watch out for will be a long-term downtrend linking the early August high modestly below $ 30.00, the September 1 high modestly below $ 29.00, and the high of the November 9 at $ 26.00, a downtrend that is likely to come into play as resistance between roughly $ 24.70 and $ 24.80.
Technical levels
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