Silver trading either side of $26.00 level as markets await remarks from Fed’s Powell

• Silver is trading with a negative bias either side of the $26.00 level ahead of remarks from Fed Chair Powell.
• The precious metal reaction is likely to take its cue from how bond markets react to Powell.

Spot silver (XAG/USD) has been trading with a negative bias on Thursday’s session so far, though the price action thus far on the session has been subdued in comparison to how silver normally trades; XAG/USD is currently swinging either side of the $26.00 mark, with the price action, for the most part, staying within 30 cents of the big figure. Silver markets are understandably in wait and see mode ahead of comments from Jerome Powell, the Chairman of the US Federal Reserve, whose remarks will be released at 17:05GMT.

Driving the day

Broadly speaking, markets remain in wait-and-see mode ahead of Powell; the S&P 500 currently trades flat as it sticks to overnight ranges either side of/just above the 3800 level, 10-year US government bond yields are flat close to 1.47% and the US dollar modestly higher, having managed to creep back above the 91.00 level, but remains well within this week’s ranges. So not much impetus from other asset classes to silver much direction!

In terms of macro developments, there is not much to update on; Weekly Jobless Claims came in pretty much bang in line with expectations (in the week ending on 27 February, 745K filed for unemployment benefits and in the week ending on 20 February, 4.295 continued to claim unemployment benefits, down from 4.419M the week before). Meanwhile, Challenger Job Cuts dropped to 34.5K from 79.5K the month before.

While Thursday’s employment data has been a little more upbeat, this is canceled out by Wednesday’s soft ADP and ISM Services Employment subindex. So far, the signals as to how this Friday’s official Labour Market Report is going to go down has been mixed from the traditional indicators, though desks note that strength in high-frequency indicators as to the health of the jobs market, so many are still bullish for Friday; at the moment, consensus expectations are for the Bureau of Labour Statistic’s survey to show that 182K jobs were added to the US economy in February.

Elsewhere, markets remain focused on the themes of 1) fiscal stimulus: it looks as though the Senate will vote in favour of US President Joe Biden’s $1.9T “rescue” package by the end of the week and markets hope for the bill to be passed into law by 14 March (this is when enhanced unemployment benefits end), 2) Fed commentary: markets will be watching Powell’s remarks for any clues as to how the Fed Chair feels about the recent rise in rates (he previously didn’t show too much concern) and as to what he thinks might be an appropriate Fed response if yields spike in a “disorderly” fashion, 3) the path of the pandemic in the US and elsewhere: news out of Europe is getting worse with lockdowns either being extended (in Germany) or tightened (in Italy and Greece) as case rise (according to the WHO, European Covid-19 infections rose for the first time in six week over the last week), but the news in the US is getting better (NIH Director Dr Fauci said it is “quite normal” to expect some normalisation by the spring).

Looking ahead, the main mover on Thursday will of course be remarks from Fed Chair Powell; if his comments spur bond market buying, this will push down yields and could be silver (and gold) bullish. Conversely, if Powell sends yields higher, this would be a bearish signal for precious metals.