Silver dumps from $27.00 to below $26.00 amid technical selling, rising real yields


  • Silver dumped earlier in Friday’s session amid a bout of technical selling.
  • The metal dropped from $27.00 to $26.00 in a matter of minutes and has failed to recoup losses.
  • Soft NFP numbers did little to affect price action, with markets much more focused on optimism and reflation.

Spot silver prices (XAG/USD) dumped shortly after Friday’s European equity cash open on Friday, dropping nearly $1 from just under $27.00 to just below $26.00 before aggressively bouncing back towards $26.50. In recent trade, the selling pressure has resumed and the precious metal is back below $26.00 again and pressing new lows in the $25.80s. On the day, XAG/USD is down over 4.5% or nearly $1.20, with similar losses being seen across other precious metals (XAU/USD down over 2.5% or $50 and trades well below $1900).

Technical selling appears to have been the main factor behind Friday’s selloff, with XAG/USD breaking below a medium-term uptrend that had been in play since early December.

Fundamentals are also weighing; the Dollar Index, with which precious metals such as silver are negatively correlated, briefly topped 90.00 in the early part of Friday’s European session (though in fairness, the DXY is heading back towards 89.50 and is now down on the day). Meanwhile, US real yields (with which precious metals are also negatively correlated) also continue to rise; the 10-year TIPS yield is trying to move above the -1.0% mark for the second time this week and a move back towards November highs above -0.8% could see precious metals such as silver move substantially lower from current levels.

NFP numbers

Recently released US labour market data for December has not had much of a lasting impact on silver; spot prices saw a minor 20 cents dip in the immediate aftermath of the broadly underwhelming report but quickly retraced. Recent selling pressure seems to be a resumption of earlier trends.

As a recap of the data; 140K jobs were lost in the US economy in December, well below expectations for a modest gain of 70K jobs. According to the Bureau of Labour Statistics (BLS), 372K waiter and bartender jobs were lost in December (largely as a result of Covid-19 restrictions), which weighed on the headline number. Meanwhile, the manufacturing sector did well, gaining 38K jobs versus expectations for a more modest gain of 20K. The unemployment rate remained unchanged at 6.7% versus expectations for a rise to 6.8% and the participation rate was unchanged at 61.5%.

As markets focus on incoming fiscal stimulus from a Democrat-controlled Congress, more stability under the Biden administration, a move towards herd immunity amid the mass Covdi-19 vaccination push looked and a general improvement in global economic growth and trade conditions later in the year, traders and investors have looked through Friday’s grim labour market report. There is too much light at the end of the tunnel for markets to care about near-term Covid-19 concerns/economic weakness; the S&P 500 just opened at fresh intra-day all-time highs above 3810, despite more than 4K Americans dying from Covid-19 on Thursday, a new daily record.

All this above-mentioned optimism is pushing nominal and real US yields higher and having a negative effect on yield sensitive precious metals like silver. Note that inflation expectations have also been rallying; 5-year break-evens have moved above 2.1% on Friday. If this continues, this may cushion the downside for precious metals, which are seen as a hedge against inflation.

Technical selling weighs on XAG/USD

XAG/USD broke below key uptrend support linking the 29 November, 11, 14, 15 and 23 December and 6 January lows earlier during Friday’s session, a move that coincided with a break below the $27.00 level. The metal found support at $26.00, which coincides with the 29 December lows. Currently, the precious metal is trading closer to $26.50, but has struggled to rally above resistance in the form of Wednesday’s $26.60 low. Should the precious metal move back towards low of the day and the $26.00 mark, a test of its 21-day moving average at $25.77 may be in store.

XAG/USD four hour chart

Share: Feed news

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Recommended content


Recommended content

Editors’ Picks

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD lost its traction and declined below 1.0850 in the American session on Thursday. Upbeat PMI data from the US, combined with the mixed action seen in Wall Street's main indexes, helps the US Dollar gather strength and weighs on the pair.

EUR/USD News

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD came under modest bearish pressure and declined toward 1.2700 in the second half of the day on Thursday. The US Dollar (USD) benefits from the PMI data, which showed an ongoing expansion in the private sector at an accelerating pace, and weighs on the pair.

GBP/USD News

Gold extends slide below $2,350 as US yields push higher

Gold extends slide below $2,350 as US yields push higher

Gold stays on the back foot and trades at its lowest level in over a week below $2,350. The benchmark 10-year US Treasury bond yield rises more than 1% following the stronger-than-forecast PMI data from the US, forcing XAU/USD to stretch lower.

Gold News

As Ethereum spot ETF approval nears, these altcoins could explode

As Ethereum spot ETF approval nears, these altcoins could explode

It is not surprising that altcoins related to Bitcoin saw a major rally post-Bitcoin spot ETF approval. Likewise, tokens closely related to Ether could ride the ETF approval wave. Ethereum Classic, Pepe, Floki and other DeFi tokens could gain momentum as the ETH ETF approval deadline nears. 

Read more

US S&P Global PMIs Preview: Economic expansion set to persist in May

US S&P Global PMIs Preview: Economic expansion set to persist in May

On Thursday, S&P Global will issue its flash estimates of the United States (US) Purchasing Managers Indexes (PMIs), a monthly survey of business activity. The survey is separated into services and manufacturing output and aggregated into a single statistic, the Composite PMI.

Read more

Forex MAJORS

Cryptocurrencies

Signatures