- Spot silver prices have recovered from a brief dip below $26.00 towards $27.00 amid a softening USD.
- A busy week in terms of US economic events lies ahead and silver could be choppy.
Spot silver prices (XAG/USD) have been on the front foot since the start of Tuesday’s European session, recovering from a brief dip below the $26.00 level to trade back in the upper $26.00s, boosted by a softer US dollar. Some market commentators have cited dovish commentary from FOMC member Lael Brainard as weighing on the dollar from Asia Pacific session highs, but most traders/market commentators are attributing the decline to positioning ahead of a busy rest of the week in terms of US data. The softer US dollar has unsurprisingly offered tailwinds to precious metals, with spot silver up roughly three-tenths of a percent or about 20 cents on the day and currently trading around the $26.75 mark, not too far from Monday highs just above the $27.00 level.
Driving the day
Influential FOMC member Lael Brainard spoke in a webinar earlier in the session and made some interesting comments regarding recent bond market moves; she noted that last week’s bond market move caught her eye and commented that if there was a persistent tightening of financial conditions, this could slow progress towards job and inflation goals. This is most concerned any Fed member has sounded yet about recent bond market price action and may strengthen the view held by some desks that if, say, US 10-year bond yields surged again and moved closer to the 2.0% mark (and 10-year TIPS yields closer to 0.0%), then the Fed might intervene via an acceleration in the pace of bond buying.
In the above scenario (where yields continue to surge but then the Fed intervenes with more QE), the impact on precious metals such as silver would be difficult to gauge; on the one hand, surging yields would have a negative impact, but on the other, increased balance sheet expansion from the Fed would have a positive impact.
Again, whilst some market commentators have cited the above as weighing on the US dollar (and benefitting the likes of silver), much more likely is that markets are positioning ahead of key US economic events later in the week; Wednesday sees the release of the ISM Services PMI report for February, a timely update on the state of the US’ service sector recovery, as well as February’s ADP National Employment Change estimate, a release that helps set expectations for the NFP release later in the week. Thursday sees Fed Chair Jerome Powell (expected to reiterate the dovish Fed script whilst now showing any concerns about rising bond yields) plus Weekly Jobless Claims numbers and Friday sees the release of the February Labour Market Report, which will be the main event of the week from a global macro perspective. Silver prices are likely to be choppy as a function of USD.