- Silver prices have seen further downside on Tuesday, as markets continue to dump havens in favour of risk.
- Vaccine optimism and strong US data are the two main factors that have weighed on precious metal demand.
- XAG/USD has for now kept its head above $23.00.
Spot silver (XAG/USD) has lost further ground on Tuesday, with the precious metal sliding briefly beneath the psychological $23.00 level in earlier trade before recovering back to around $23.20. Still, silver trades with losses of more than 1.5% on Tuesday, or nearly 40 cents.
Precious metals bet against further Fed stimulus
Precious metals have taken a beating this far this week, with silver prices down nearly 4% and gold prices down nearly 3.5%. The sell-off was initially triggered by further positive vaccine news from AstraZeneca prior to Monday’s European equity cash open. Better than expected vaccine news in November has given market participants more confidence that the global economy can enjoy a strong post-pandemic economic recovery in 2021 reducing demand for safe havens such as gold and silver.
Moreover, precious metals markets were dealt a further blow later on during Monday’s European session by much stronger than expected US Markit PMI data for November, that showed that vaccine optimism had more than made up for concerns about the return to lockdowns over winter, as well as revealing increased inflationary pressures across the economy.
Further evidence of the stronger than expected performance of the US economy came on Tuesday in the form of much stronger than expected S&P/CaseShiller house price data, which had prices up 6.6% YoY in September.
Analysts will argue that such strong data, combined with recent vaccine optimism and the fact that US stock markets are at or close to all-time highs undermines the case for further stimulus from the Fed in December. Most still expect the Fed to expand their QE purchases to longer-dated maturities, but the argument to increase the total monthly purchase size from $80B has clearly been weakened by recent developments.
Given the above, precious metals, which typically do well when central banks ease as market participants hedge themselves against the risk of higher future levels of inflation, have not fared well thus far on the week, and the downside might not be over just yet.
Silver in short-term bearish trend channel, negative bias remains intact
Silver has been moving lower within a short-term bearish trend channel (see the one hour chart below), and continues to trade within the confines of this channel, meaning that the precious metal’s short-term bias remains to the downside.
Aside from the psychological $23.00 level that has already proven solid support on Tuesday, the next level to watch out for is at $22.60, the 29 October low.
To the upside, if XAG/USD can break to out the top of its downward trend channel, resistance just above $23.60 will be worth noting (low of 19 November).
XAG/USD four hour chart
XAG/USD one hour chart
Other key levels
|Today last price||23.21|
|Today Daily Change||-0.37|
|Today Daily Change %||-1.57|
|Today daily open||23.58|
|Previous Daily High||24.4|
|Previous Daily Low||23.42|
|Previous Weekly High||25.08|
|Previous Weekly Low||23.64|
|Previous Monthly High||25.56|
|Previous Monthly Low||22.59|
|Daily Fibonacci 38.2%||23.8|
|Daily Fibonacci 61.8%||24.03|
|Daily Pivot Point S1||23.2|
|Daily Pivot Point S2||22.83|
|Daily Pivot Point S3||22.23|
|Daily Pivot Point R1||24.18|
|Daily Pivot Point R2||24.78|
|Daily Pivot Point R3||25.15|
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