- 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
-637436410786806115.png)
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.
Recommended content
Editors’ Picks
EUR/USD drops toward 1.0700 after US jobs report
EUR/USD came under renewed bearish pressure in the second half of the day on Friday and declined toward 1.0700. Stronger-than-expected Nonfarm Payrolls (NFP) data helps the US Dollar gather strength ahead of the weekend and forces the pair to stay on the back foot.
GBP/USD retreats below 1.2500 as USD gathers strength
GBP/USD lost its traction and turned negative on the day below 1.2500. Following the initial mixed reaction to the upbeat May jobs report from the US, the US Dollar found its footing and caused the pair to reverse its direction. Nevertheless, GBP/USD stays on track to snap a three-week losing streak.
Gold falls below $1,960 as US yields rebound after US jobs data
Gold price turned south and declined below $1,960 on Friday. After the data from the US revealed that Nonfarm Payrolls rose 339,000 in May, the benchmark 10-year US Treasury bond yield gained more than 2% and recovered toward 3.7%, weighing heavily on XAU/USD.
China crypto community picks Ethereum, Arbitrum and BNB Chain as top protocols
Ethereum, Arbitrum and BNB Chain protocols are top picks for the Chinese crypto community, data from a report shows, a possible bullish catalyst for tokens related to these protocols as Hong Kong opens the door of crypto to retail investors.
LULU stock adds 15% on big Wall Street beat
Lululemon Athletica did it again. In something that has become quite predictable, LULU stock sailed 14.9% higher in Friday’s premarket to $377.20 after the prized athleisure brand posted a nearly 15% earnings beat for the first quarter.