- On Monday, silver is climbing solid, courtesy of falling US Treasury bond yields, meaning US bond real yields are down, a tailwind for precious metals.
- The US Dollar is also down by more than 0.50% after US manufacturing activity dropped but remained above recessionary territory.
- Traders are focused on Tuesday’s data ahead of Friday’s US Nonfarm Payrolls report.
Silver price rallies sharply as the fourth quarter begins, amidst a risk-on impulse in the financial markets, due to overnight news that the newest UK government has backpedaled with some tax cuts, easing traders’ fears. Demand for US Treasures jumped, so yields edged lower, meaning higher precious metals prices. At the time of writing, the XAG/USD is trading at $20.35 a troy ounce in the North American session.
US equities portray a positive sentiment across the board. The Institute for Supply Management (ISM) reported that manufacturing activity grew at the slowest pace in 2 and half years in September, dropping to 50.9, below August 52.8, but staying in expansionary territory, negating the “technical recession” in the US, as 2022 Q1 and Q2 GDP showed negative readings. In the same report, New Orders dropped to 47.1 from 51.3, while prices paid edged lower.
The US data began to flash the effects of the Fed’s tightening monetary conditions. Since Fed officials remained with their hawkish rhetoric throughout the last week, market players should expect additional rate hikes by November’s meeting, namely 75 bps.
Meanwhile, the US Dollar Index, a gauge of the buck’s value vs. a basket of peers, edges down by 0.57% down at 111.546, while the US 10-year Treasury bond yield collapses 25 bps to the 3.582% threshold, a headwind for the greenback.
Therefore, the fall in US 10-year TIPS yield, a proxy for real yields, is down at 1.45%, after reaching a YTD high at 1.70%, further explaining the appreciation of precious metals.
What to watch
On Tuesday, the US economic docket will feature Durable Goods Orders, alongside JOLTs Jobe Openings, ahead of September’s Nonfarm Payrolls report, revealed on Friday.
Silver (XAG/USD) Key Technical Levels
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