Silver eases from fresh highs as investors seek a balance after the bond auction

• The precious metals have scored fresh highs and the outlook remains solidly bullish, at least for silver.
• Markets are heavily invested in gold and short of the dollar, so a shakeout could be on the cards.

Update: Silver is trading around $26, off the lows but also below the highs seen earlier. It seems that turbulence in XAG/USD and other precious metals is calming down after the US bond auction. America's large debt issuance has caused substantial moves in markets, which are now making may for bulls and bears to plot the next moves.  More: Silver Price Analysis: XAG/USD remains trapped in a pennant, awaits range breakout

The price of silver has continued its advance into the $28 area reaching a high of $28.45 on Thursday, rallying from $26.79.

 

The greenback just can't catch a break and there is more downside in the pipeline if markets continue to trade with complacency pertaining to the coronavirus pandemic, geo-politics and even the macroeconomy.

The US dollar has been on the receiving end of Fed policy and a relentless recovery in the global equity markets. 

However, it should be noted that there is scope for temporary corrections to this which is where the greenback will come back to the table as the markets preferred go-to currency at times of risk-off.

We had started to see at least some correctives about the greenback earlier this week, but the amount of bearishness is overwhelmingly pertaining to the Fed and the US economy. 

The consensus is that the US is not able to grow at a faster rate than the rest of the world and that has taken value away from parking idle capital denominated in US rates. 

The precious metals train keeps on chugging

Continued weakness in the USD and real rates remain the main factors supporting the surge higher,

analysts at TD Securities have noted

Signals from the Fed that they are weighing the abandoning of preemptive rate moves have also added some juice to the move.

While we agree real rate suppression and massive stimulus on a global scale will see gold move higher, we caution the yellow metal is still currently running hot relative to these observable drivers.

Silver to take the reigns

Indeed, the markets are stretched in terms of positioning in both gold and the US dollar, and that is where there is some scope for the ratio to improve in silver's favour. 

Markets will be on the lookout for a recovery in US rates or deflationary sentiment ging forward, for gold doesn't not as a hedge against such. Meanwhile, so long as the markets assume a recovery in the industry, at least for the nearer term, silver could find its edge:

On the industrial side, silver continues to outperform and remains our precious metal of choice as both precious metal flows, and industrial demand improvements combine for strong performance.  

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