- Silver has taken a beating on Thursday but stabilised just above the $22.00 level as focus switches to Friday’s NFP.
- The precious metal has been under selling pressure recently as Wednesday’s hawkish Fed minutes pump Fed tightening bets.
- XAG/USD could be headed for a retest of December lows under $21.50 if the jobs report endorses a March hike.
Spot silver (XAG/USD) prices have taken a beating thus far on Thursday, though the selling pressure has eased in recent trade after the precious metal found support at the $22.00 level. At current levels just below $22.20, XAG/USD trades lower by more than 2.5% on the day and is nearly 5.0% below the highs at set above $23.20 on Wednesday prior to the latest hawkish Fed minutes. The minutes surprised on a number of fronts, with FOMC participants uniformly concerned about elevated inflation and in support of a potential sooner and faster rate hiking cycle to address risks. Moreover, strong support for a prompt reduction in the size of the Fed’s balance sheet once the hiking cycle is underway also came as a surprise, with it previously just having been hawkish Fed members to jawbone about quantitative tightening.
The hawkish nature of the minutes sent bond yields shooting higher and, most notably for precious metals markets, the move has been driven by real yields. While the US 10-year is up more than 20bps on the week, the 10-year TIPS yield is up around 25bps and recently broke out to its highest levels since June of last year. Above -0.80%. Higher real yields increase the opportunity of non-yielding assets such as precious metals, thus weighing on their appeal to investors. Precious metals traders will also note that market-based measures of inflation expectations have been heading sharply lower this week, with 10-year break-evens reversing from Tuesday’s highs above 2.64% to current levels around 2.45%. Lower inflation expectations reduce the demand for assets that offer inflation protection such as silver and gold.
In terms of what's next for spot silver, trade is likely to now enter wait-and-see mode ahead of Friday’s US jobs report. With markets pricing a strong possibility of a March rate hike, traders primarily seek to interpret how the December jobs report boosts or hinders the chances of March lift-off. The Fed in December framed the labour market as making “rapid” progress back to full-employment, even in light of December’s sub-par non-farm payrolls number of 210K and has said that if this rate of improvement continues, rate hikes will soon be warranted.
The Fed is likely looking through softer monthly NFP numbers so long as measures of slack (the unemployment rate and participation rate) show signs of improvement (particularly the former). Fed policymakers have acknowledged that the pandemic is holding people back from the labour market, meaning the scope for large MoM employment gains at present is limited. As long as slack measures continue to point to a tight labour market (as other data releases this week did), the bar is low for Friday’s headline NFP number to fulfill the Fed’s continued rapid progress criteria. Consensus expectations for 400K jobs having been created in December easily fits this bill.
That suggests the scope for a rebound in precious metals on a dollar/real yield pull-back as traders reverse recent hawkish bets for a March hike is limited. If that was to be the case and XAG/USD did rally, the main levels of resistance to look out for are the 21-day moving average and recent lows of the last few weeks around $22.60 and then the highs from the last few weeks in the $23.40 area. If a strong labour market does give a thumbs up to a March rate hike, then spot silver prices could be headed back for a test of December lows just under $21.50, a further 3.0% decline from current levels.
|Today last price||22.19|
|Today Daily Change||-0.54|
|Today Daily Change %||-2.38|
|Today daily open||22.73|
|Previous Daily High||23.26|
|Previous Daily Low||22.73|
|Previous Weekly High||23.44|
|Previous Weekly Low||22.59|
|Previous Monthly High||23.44|
|Previous Monthly Low||21.42|
|Daily Fibonacci 38.2%||22.93|
|Daily Fibonacci 61.8%||23.06|
|Daily Pivot Point S1||22.56|
|Daily Pivot Point S2||22.38|
|Daily Pivot Point S3||22.03|
|Daily Pivot Point R1||23.08|
|Daily Pivot Point R2||23.43|
|Daily Pivot Point R3||23.61|
Follow us on Telegram
Stay updated of all the news
EUR/USD holds steady above 1.0750 on improving risk mood
EUR/USD continues to trade above 1.0750 on Monday. The data from Germany showed that IFO Business Climate Index improved to 93.3 in March from 91.1 in February, helping the Euro stay resilient against the US Dollar. The risk-positive atmosphere further supports the pair.
GBP/USD regains 1.2250, Bailey speech eyed
GBP/USD clings to modest gains above 1.2250 on improving risk mood on Monday. The US Dollar struggles to gather strength despite rising US Treasury bond yields. In the absence of high-impact data releases, investors will pay close attention to BOE Governor Bailey's speech.
Gold extends slide to $1,950 as US yields rebound
Gold price has extended its daily slide to the $1,950 area in the European session. Amid easing fears over a global banking crisis, the benchmark 10-year US Treasury bond yield rebounds toward 3.5% on Monday, weighing heavily on XAU/USD.
Four reasons why SUSHI holders will have a bullish week despite SEC's move
SushiSwap price undid the early March gains in the last week after the SEC subpoenaed the platform’s head chef Jared Grey. As a result of this announcement, the token collapsed by roughly 18%.
Alibaba (BABA) edges higher after Jack Ma returns to China for AI talk
BABA shareholders begin the week with a glimmer of hope after founder Jack Ma was seen visiting China after spending more than one year abroad. The report originally led to Alibaba's shares in Hong Kong rising 4% before subsiding.