Silver reclaims $26.00 level as key risk events loom
- Spot silver has rallied back above the $26.00 level ahead of key risk events later in the week.
- Precious metals markets could be volatile amid the release of US retail sales on Tuesday and the FOMC on Wednesday.
Spot silver prices (XAG/USD) trade on the front foot on Monday at the start of US trade, with spot prices currently up over 1.0% on the day or trading with gains of around 30 cents. Silver prices have subsequently managed to reclaim the $26.00 level and now trade in the $26.20s, as bulls eye a move back towards last week’s highs at just above $26.40 – note that the 21-day moving average also resides around this level, so this is a key area of resistance. A break above this resistance could open the door to a move on towards the 50-day moving average at just under $26.70.
Driving the day
US government bond yields are seeing a mild pullback at the start of the week; 10-year yields are down 2bps to under 1.62% and 30-year yields are down more than 3bps to under 2.37% - note that these are still very elevated levels, but likely there is some profit-taking activity going on which is supporting bond prices (and pushing yields down) after last Friday’s bond market sell-off. Lower yields appear to be supporting precious metals or at least shielding them from the negative impact of the marginally stronger US dollar.
In terms of why bond yields are a tad lower and the dollar a little stronger; there have been no major fundamental developments over the weekend, or not at least anything big enough to be really moving markets at the start of the week. As such, there is an indecisive feel to trade on Monday and given the lack of key events on the calendar, markets are likely to remain rangebound for the rest of the session.
Things are set to pick up from Tuesday with the release of US Retail Sales numbers for February and then the FOMC rate decision on Wednesday. As ever, expect the US dollar and US government bond markets to be choppy on these events – their reaction is likely to influence price action in the silver (and gold) markets, with any outcome that causes a drop in the dollar and yield the most likely to benefit precious metals (and vice versa).