Silver bounces at $25.00 mark despite stronger USD, likely driven by profit taking

• Spot silver is higher on Wednesday despite a stronger US dollar, likely as a result of profit-taking.
• XAG/USD prices bounced at the $25.00 level and currently trade nearly 5.0% lower on the week.

Despite an ongoing pick up in the fortunes of the US dollar on Wednesday spot silver prices (XAG/USD) are holding up fairly well. The precious metal found pretty decent support at the $25.00 level, which has been an important area of support this month. Given that XAG/USD had tanked nearly 5.0% since the start of the week when prices hit the $25.00 level during the Asia Pacific session, it is perhaps not surprising to see the sell-off lose some momentum as silver traders book some profits on their short positions. At present, spot silver prices are around 0.6% or roughly 15 cents higher on the session. Markets do not seem to have paid much credence to recently released US Durable Goods Orders or PMI data, though it is still worth mentioning.

US data in focus

US data has been in focus over the last two hours; the February Durable Goods Orders report (released at 12:30GMT) was much worse than expected, with the MoM growth in orders dropping 1.1% versus forecasts for an increase of 0.8% and the core orders down 0.9% versus forecasts for an increase of 0.6%. Hard data for the month of February has thus far been much softer than expected (recall retail sales and industrial production both also disappointed expectations). Wells Fargo attributes the poor weather last month as one factor contributing to Wednesday’s disappointing Durable Goods data, but sees ongoing supply chain bottlenecks, which are restraining new orders, as a key problem. However, the bank still expects a strong rebound in business spending this year.

Elsewhere, the preliminary US Markit PMI survey has been released and was very strong as expected; the manufacturing index rose modestly to 59.0 from 58.6 last month and the services index was in line with expectations at 60.0, an 80-month high, according to Markit. According to IHS Markit’s chief economist Chris Williamson, “Another impressive expansion of business activity in March ended the economy’s strongest quarter since 2014. The vaccine roll-out, the reopening of the economy and an additional $1.9 trillion of stimulus all helped lift demand to an extent not seen for over six years, buoying growth of orders for both goods and services to multi-year highs”. However, Chris adds that “producers were increasingly unable to keep pace with demand, however, due mainly to supply chain disruptions and delays. Higher prices have ensued, with rates of both input cost and selling price inflation running far above anything previously seen in the survey’s history”.