• US 10-year bond real yields are back below -1.0% giving a boost to precious metal markets.
  • Spot silver has subsequently rallied as high as the $24.50 level from below $24.00 on Monday.

Spot silver (XAG/USD) has traded on the front foot thus far on Tuesday, with prices currently trading close to highs of the day at just above $24.50. At present, XAG/USD trades with gains of around 60 cents or over 2.5% on the day.  

Falling real yields keeping precious metals supported

After rallying to nearly -0.95% on Monday, the yield on the US 10-year TIPS has slumped back to -1.0% and currently sits close to lows since mid-September. For context, falling US real yields (since the start of the year the US 10-year TIPS yields has dropped from roughly 0.0% to current levels at around -1.0%) have been identified as a key driver of precious metals; the lower the real rate of return on investments in bonds, the more comparatively attractive it is to invest in non-yielding precious metals.

Compounding the benefits for precious metals, the move lower in real-yields on Tuesday is being driven by rising inflation expectations, not by falling nominal yields; the US 10-year breakeven inflation rate has risen back towards monthly highs close to 1.88% (implying expectations are for CPI to average 1.88% over the coming 10 years), a more than 3bps rise since last Friday. This appeals to the safe-haven property carried by precious metals that they are a hedge against future inflation. Should inflation expectations continue to rise and real-yields continue to fall in 2021, precious metals ought to remain supported.

Silver eyes break of key long-term downtrend

XAG/USD is currently probing a key downtrend that links the 7 August, 11 September, 9 November and 8 December highs, which seems to have come into play around the $24.50 mark. Should this level go, that would open the door for a test of the monthly high in the $24.80s and, beyond that, a break above the $25.00 level and a move towards the $26.00 which coincides with the November high.

XAG/USD daily chart

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.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

AUD/USD attacks 0.7100 after China data dump miss

AUD/USD attacks 0.7100 after China data dump miss

AUD/USD is on the defensive at around 0.7100, as traders assess disappointing Chinese activity data and the PBOC rate cuts. The pair tumbles as the US dollar picks up safe-haven bids amid China's data-led risk-aversion. 

AUD/USD News

USD/JPY rebounds in sync with US dollar, eyes 133.50

USD/JPY rebounds in sync with US dollar, eyes 133.50

USD/JPY is advancing towards 133.50, rebounding in the tandem with the US dollar, as risk sentiment takes a beating on discouraging Chinese activity data and the unexpected PBOC rate cuts. The pair reverses the Japanese Q2 GDP miss-led drop below 133.00. 

USD/JPY News

Gold struggles around $1,800, with key focus on Fed Minutes

Gold struggles around $1,800, with key focus on Fed Minutes

Gold Price is struggling to find demand at the start of the week near the $1,800 mark, as bulls give into the bearish pressures amid a cautious risk sentiment. XAU/USD yielded a weekly close above key 50 DMA, Fed Minutes in focus.

Gold News

Shiba Inu eyes 50% rally as SHIB price enters 'cup-and-handle' breakout mode

Shiba Inu eyes 50% rally as SHIB price enters 'cup-and-handle' breakout mode

The Shiba Inu breakout appears almost ten days after SHIB's addition to Binance Card. SHIB broke out of its prevailing "cup-and-handle" pattern on Aug. 14, raising its prospects of securing additional gains in the coming weeks.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Forex MAJORS

Cryptocurrencies

Signatures