Silver bulls showing their hand in early Asia on USD weakness

• USD/XAG firmly bid as the week gets going, with all eyes now turning to the Fed.
• Real rates have continued their grind lower, but retail trades could be the weak link in the bull’s chain.

The price of silver shot higher in late North America and extended the gains when the market opened again in early Asian trade.

Silver is currently 1.95% higher at the time of writing, shooting up from an opening low of 24.4860 to a session high so far of 25.1052 vs the US dollar.

Risk appetite gradually improved from European to US trade, that did not prevent precious metals from extending their gains to, seeing gold make all-time highs.

 Silver trades sharply higher towards levels not seen since 2013.

The dollar fell against all major currencies as markets look ahead to the FOMC while dovish policy expectations have boosted risk appetite more broadly.

Beneath the surface, however, we see evidence that trading behaviour has diverged from its recent past, analysts at TD Securities have argued.

Meanwhile, while real rates have continued their grind lower, the rally in gold prices has sharply overshot the decline in real rates over the past few trading sessions. Further, it appears that one cohort’s behavior in particular may have contributed — retail traders. Specifically, the evidence suggests that a surge in retail interest may be helping silver outperform.

All eyes on the Fed

Investors are now looking ahead to the Fed this week.

Expectations are growing that they will be even more dovish than recently, keeping policy accommodative that has been pushing demand even higher.

For precious metals bulls, the risk at this week’s FOMC relates to the duration adjustment required as auction sizes are set to significantly increase, which could generate a supply-demand mismatch and pressure long end rates should they keep the composition unchanged.,

the analysts at TD Securities explained. 

Silver levels