Silver off AsiaPac highs, consolidates below $26.50 in wake of stunning 2020 performance

Spot silver prices are off highs set during Asia Pacific trade and thus trade lower on the day.
The technical picture looks bullish, however, though further gains are likely to wait until January.
Spot silver was the best performing precious metal in 2020 after years of underperformance.

Joel Frank Independent Analyst

Spot silver (XAG/USD) prices broke to the upside of a short-term bull flag and longer-term pennant structure flagged in an article on Wednesday, with prices rallying as high as $26.70 in early Thursday Asia session trade before sliding back to current levels around $26.50. With the metal off its Asia Pacific highs, it currently trades with losses on the day of more than 1% or around 30 cents. However, note that prices found support at $26.30 upon the retest of the previously broken above the short-term bull flag and longer-term pennant, implying that further upside from current levels is likely.

However further upside might have to wait until January; markets have been incredibly quiet on the final trading day of the year, with much of Europe shut for Christmas Eve holidays and many market participants on both sides of the Atlantic away on vacation anyway. Year-end portfolio rebalancing flows have been distorting trade this week and have generally worked against the favour of the US dollar (and in favour of precious metals such as gold and silver) and there could be some fireworks at the final 4pm London Fix of the year (when global financial institutions will take the average over exchange rates over a two-minute window in order to value their international portfolios, hence why the time period can see some manipulation).

2020: Silver’s year…

Spot silver was the best performing of the four major precious metals and looks set to finish the year with gains of around 56.5%, significantly outstripping spot palladium’s gains of just over 30%, spot gold’s gains of just under 30% and spot platinum’s gains of around 19.5%. An unprecedented expansion of the money supply by major central banks across the globe (most notably, the Fed) amid the Covid-19 crisis was the main factor behind the impressive gains seen across precious metals markets. In terms of the reason behind silver’s outperformance, it seems as though some catch up following years of underperformance was at play.

At the start of the year, spot silver prices were over 60% down from their all-time highs set back in 2011. Meanwhile, spot gold was around 28% below its all-time highs set back in 2011. Of course, spot gold went on the smash through its 2011 highs and cross above the $2000 mark for the first time by Q3 2020. Whether spot silver can match this feet in 2021 seems unlikely, given it would need to appreciate more than 80% from current levels in the $26.00s to break above all-time highs close to $48.00. So while 2021 might not see new all-time highs for silver, if precious metals continue to do well, there is every chance that XAG/USD continues to be the best performer out of the bunch as it continues to unwind that prolonged period of underperformance seen throughout the 2010s.

XAG/USD four hour chart

Author

Joel Frank

Independent Analyst

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018, specialising in the coverage of how developments in the global economy impact financial asset

AUD/USD holds above 0.6900 ahead of Fed's Warsh

AUD/USD struggles to capitalize on the previous day's modest bounce from its lowest level since early July and trades above 0.6900 in the Asian session on Friday. Thursday's disappointing Australian jobs data tempered RBA rate-hike bets, capping the Aussie. The US Dollar (USD), meanwhile, is regaining positive traction as this week's hot US CPI and PPI reports keep Fed rate hike bets firmly on the table. This further limits the pair ahead of Fed Chair Kevin Warsh speech.

USD/JPY retakes 158.00, with eyes on Warsh's speech

USD/JPY retakes 158.00 in the Asian session on Friday, holding on the overnight bounce from the vicinity of 157.50, or a one-week low, amid the emergence of some US Dollar buying. This week's hot US CPI and PPI reports lifted Fed rate-hike bets, which, along with stable US bond yields and geopolitical uncertainties, help revive USD demand. Traders, however, remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen, which could cap the currency pair ahead of Fed Chair Kevin Warsh's speech.

Gold eases to $4,150 as traders await Warsh's speech

Gold drifts lower to near $4,150 in the Asian session on Friday, reversing part of the previous day's move up amid reviving US Dollar demand. US inflation data released this week reaffirmed bets for at least one Fed rate hike this year, while US bond yields stabilize after Thursday's steep decline. This, along with geopolitical risks, underpins the safe-haven USD, which, in turn, is seen weighing on bullion ahead of Fed Chair Kevin Warsh's speech.

Ethereum reclaims $2,400 as PPI hits 6.3% and yields fall

Ethereum (ETH) is back above $2,400 on Thursday, rebounding from a brief decline toward $2,340, which was sparked by an upside surprise in the US wholesale inflation report. The Producer Price Index (PPI) increased 1.3% monthly and 6.3% annually in September, far above expectations of 0.5% and 5.3%, respectively.

The Iran war will eventually end. Tariffs won't. Here's the problem

Two cost shocks are in the September Consumer Price Index (CPI), and they have different half-lives. Energy is up 20.4% on the year and accounts for about 1.3 points of the 3.7% headline, and that shock reverses when Oil does: Brent was back at its pre-war price on July 1 and above $100 again by the end of the month, after the ceasefire collapsed on July 8.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.