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  • Silver holds in bullish territory, with March correction tops and a 78.6% Fibo in sight. 
  • Fed and COVID-19 to underpin precious metals longer term.

 Silver is trading at $15.4088 and down 0.38% at the time of writing, having travelled between a range of between $15.2211 and $15.6001. The markets are fixated on the US and its response to COVID-19 with respect to the economic shutdown and prospects of getting businesses and the population back to work.

Meanwhile, equities are back and forth, with JP Morgan and Exxon Mobil weighing along with Chevron and Boeing. On the other hand, tech stocks have been rising, even in the face of 5.25 million jobless claims. 

Fed a the lower bound for longer, bullish for precious metals

Indeed, the global economic downturn is fuel for precious metal bulls as the Federal Reserve is expected to remain at the zero-bound for longer than would be implied by the COVID-19 contagion’s impact alone. Precious metals will continue to attract a bid in which real rates are negative. 

“The Fed’s massive QE program and the fiscal impulse could see long-end rates rise during the recovery phase, but not without rising inflation expectations, which should keep real rates suppressed,” analysts at TD Securities explained, adding, “silver could see some marginal algo short-covering, but we don’t expect any significant flows from trend followers.”

Gold or silver?

the ratio is favouring a bid in silver, which will also see spikes in short-covering, but makes for a choppy afar in trying to chase fair value. However, with an extreme number of traders long of gold, likely holding outsized position sizes, suggests that the bullish narrative has reached a widespread consensus, so longs are likely to commit to their positions. Additionally, industrial demand for the white metal should be traded with caution pertaining to the global economic downturn.

Silver levels

A 61.8% Fibonacci level is calling with the price supported a structure and a 50% mean reversion level. A break onto the 16 handle and through the 61.8% opens risk to 17.50s which meets the March correction tops and a 78.6% Fibo.