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  • Silver prices have been choppy in recent trade, swinging either side of the $24.00 level and between the 21 and 50DMAs.
  • Following the ECB rate decision and US CPI, attention returns to Brexit, the EU council summit and US fiscal stimulus talks.

Spot silver (XAG/USD) prices have been choppy in recent trade, swinging either side of the $24.00 level amid mixed signals from other asset classes. As things stand, the precious metal trades flat on the day just below $24.00.

Mixed signals

Broad risk appetite has been difficult to decipher thus far on Thursday; US equities had continued their recent pullback from all-time highs earlier in the week in pre-market trade, but have since recovered back to flat on the day (the S&P 500 is back from lows below 3650 and trading in the 3670s). Meanwhile, crude oil markets have rallied, with WTI trading with gains of nearly $2 or over 4%, US bond yields are broadly flat and USD is a little softer and back beneath 91.00.

Thus, silver has seen choppy, indecisive trade, seeing some upside after the ECB extended its PEPP and TLTRO stimulus programmes and after US inflation beat expectations and moving as high as the $24.20s, before pulling back below the big figure. Looking ahead, with tier one US data and the ECB event out of the way, focus can now return to ongoing negotiations between the EU and UK regarding Brexit, between Poland and Hungary and the rest of the EU regarding the recovery fund and 2021-2027 budget and between the Republicans and Democrats regarding another round of US Covid-19 related fiscal aid.

In terms of the latest on each, starting with Brexit; officials on both sides have become quite pessimistic on the chances for a deal after UK PM Boris Johnson and EU Commission President von der Leyen’s meeting last night failed to bridge the still large gaps between the two sides negotiating stances, though talks will continue until a final decision on whether a deal is possible is set to be made on Sunday. Meanwhile, Brexit will be a topic of discussion at the European Council Summit which commences on Thursday.

Sticking with the European Council Summit, aside from discussions over Brexit another key topic of discussion will be on the EU’s next-generation recovery fund and budget, which is set to be funded for the first time ever by jointly issued EU debt. Optimism that a deal so that Hungary and Poland remove their veto on the recovery fund and budget has grown in recent days. Indeed, a deal has reportedly already been reached although the Dutch PM has threatened to veto any “watered-down” compromise over rule-of-law.

Finally, the Senate is set to vote on a one-week stopgap bill that will prevent a government shutdown at the end of the week and allow negotiations on further Covid-19 fiscal aid to continues. US House Speaker Nancy Pelosi recently hit the wires saying that bipartisan talks between the Republicans and Democrats regarding further fiscal aid are making great progress. Do note that Pelosi has said these kinds of things in the past, however, when actually talks were nowhere near yielding a result.

In terms of what this all means for silver; good outcomes on the above themes (i.e. deals reached on Brexit, the EU budget and recovery fund and further US fiscal stimulus) will boost risk appetite and likely hurt USD, which might be silver positive. However, US nominal yields will likely rise (given expectations of more debt issuance) which could be bad for precious metals, though not if inflation expectations rise by enough to keep real yields nice and low at current levels (i.e. the 10-year US TIPs yield near -1.0%).

XAG/USD rangebound around $24.00 again

Spot silver prices have fallen back into a $23.50s to $24.30s range that was in play for most of last week and the beginning of this week, where prices found it difficult to break to far away from the 21 and 50-day moving averages at $23.94 and $24.15 respectively. To the upside, if this range does go, a retest of Monday highs in the $24.80s is likely, while to the downside the next significant area of resistance is around the $23.00 level and then the $22.00 level below it.