Silver back to above $27.50 mark, on way to last week’s high

by Jonathan Adams

Spot prices have risen from the $27.30s to above the $27.50 level

Prices of spot silver are on the front foot on the first trading day of the week. Spot prices have risen from the $27.30s to above the $27.50 level. Prices reached around $27.70 in European morning session, not far from the $27.80 highs reached last week. A break above last week’s high might lead back towards early month highs of just above the $30.00 level, though this would require a more than 9% appreciation from present levels, which seems unlikely in the short-term.

Higher XAG/USD was due to soft dollar conditions on Monday. The key price action drivers will be updates on US fiscal stimulus, developments around global vaccination and infection trends, the release of the minute from last month’s FOMC meeting, as well as US January Retail Sales data in the on Wednesday and preliminary US February PMIs on Friday.

Despite the absence of Chinese and North American market participants, safe havens assets are struggling on the first trading day of the week, as both the markets are closed due to public holidays The US markets are closed because of Presidents’ Day holiday, while Chinese markets are shut due to Lunar New Year celebrations. Global equity and crude oil markets have been rallying given optimism regarding the state of the global pandemic. The UK vaccinating its 15M most vulnerable citizens (a crucial milestone), while infection rates continued to drop in the US as it ramps up its vaccination efforts.

Positive news on the pandemic comes amid expectations for more US fiscal stimulus, ongoing global central bank support and a rapid global economic expansion as populations in key markets hit herd immunity. That is why, US equity index futures hit new all-time high levels on Monday and US bond yields are also rising. The 10-year bond yield is now above 1.21%, though, real yields remain low (the 10-year TIPS sits at -1.02%), which is important for USD. Nominal yields will have to be accompanied by rising real yields in order to be bullish for the US dollar (which would make the USD a more attractive investment relative to other currencies).

As the US dollar is under pressure, and the Dollar Index (DXY) dropped back to close to last week’s lows in the 90.20s, and inflation expectations seeing further upside, this is a bullish combination for precious metals markets. Not that gold markets have been buying into this, but silver, palladium and platinum are all seeing upside.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
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