Silver prices taking a beating on the trade-news of the day

The trade-news of the day is helping to put pressure on the precious metals, with silver suffering the worst single day in over a month. XAG/USD is down 1.90% at the time of writing, having travelled from a high of $17.32 to a low of $16.80. 

Silver is taking up the brunt of today's positive trade news story from Bloomberg which cites people familiar to the mater who said that "China is moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions over Hong Kong and Xinjiang."

Then, with respect to yesterday's risk-off headlines, Bloomberg wrote,

"The people, who asked not to be identified, said that U.S. President Donald Trump’s comments Tuesday downplaying the urgency of a deal shouldn’t be understood to mean the talks were stalling, as he was speaking off the cuff. Recent U.S. legislation seeking to sanction Chinese officials over human-rights issues in Hong Kong and Xinjiang are unlikely to impact the talks, one person familiar with Beijing’s thinking said."

At the same time, the US dollar has stablised in the 97.40/60s following a further deterioration of strength earlier in the day which sent the mightly buck to the lowest levels in a month. 

Fed's asymmetric reaction function

Meanwhile, analysts at TD Securities, (TDS), pointed out that the Fed's asymmetric reaction function suggests they will either cut rates further if growth disappoints or stay the course if growth recovers, ultimately pressuring real rates further." The comments follow a switch-up in US data, notably in the manufacturing sector from which arrived below the mark most recently, promoting a series of comments from US President Trump who blamed the Fed and the strength of the US dollar for the industry decline. 

The Trade-Related Twitter Index and precious metal correlations

On the topic of Trump's tweeting, the TDS analysts explained, "Our proprietary indices tracking President Trump's tweets find that the 20-day rolling count of a Trade-Related index — which includes tweets with such terms as "dollar", "Trade", "farmers", "China" or "tariffs" — is actually hovering near its yearly lows, while monetary policy-related tweets (with words such as "economy", "inflation", "Fed" or "Powell") have recently been on the rise," the analysts added and continued, "The latter has implications for gold vol, which is already creeping higher in response to the uptick in monetary policy related-tweets, although trade-related tweets have had a dampened effect of late given that their frequency remained near their yearly lows over the last 20d." Note, the analysts talked about gold here, but the same could be said for silver. 

"That being said, the trade-related twitter index has room to grow as we approach Dec 15 without a 'phase one' deal signed as of yet. In this context, we're confident that the fundamental backdrop will result in higher prices into next year,"

the analysts concluded. 

Silver levels