Silver rises back to mid-$24.00s, supported amid soft USD conditions
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Silver rises back to mid-$24.00s, supported amid soft USD conditions

  • Silver has been on the front foot since the start of US trade, rising from $24.00 to $24.40s.
  • Market focus is now turning to remarks from President Biden after the US cash close, with focus on infrastructure spending.

Spot silver prices (XAG/USD) have recovered in recent trade, rallying back from around the $24.00 level to the $24.40s over the past few hours, with most of the gains coming in the first half of US trading hours. Heading into the US close, spot silver is trading with healthy gains of 1.6% or just under 40 cents on the day.

Driving the day

USD bulls appear to have run out of steam following what has been a very strong month (the DXY is set for its best monthly gains since July 2019 of 2.4%). Surpassing the 93.50 mark appears to have been one key psychological hurdle too much, with traders instead opting to book some profits in lieu of the month and quarter-end. Weakness in the buck on the final trading day of the month has given dollar-denominated precious metals some much-needed respite. Mixed US data (strong ADP and Chicago PMI numbers but a weak Pending Home Sales print) have not had a lasting impact on precious metals markets.

Looking ahead, US President Joe Biden is expected to unveil more details on his administration’s infrastructure spending plans; he is expected to announce a $2.25T package, part one of two infrastructure bills his administration will seek to push through Congress this year. Particular attention will be focused on how he intends to pay for the spending; a corporation tax hike to 28% and higher taxes on capital gains and higher earners are all on the table, though a wealth tax is reportedly not. Traders ought to watch the reaction in US government bond and FX markets to gauge the precious metal reaction; any strength in USD and yields would be a negative for silver.

US Data Recap

A solid estimate of the number of jobs added to the US economy in March from ADP and a blowout Chicago PMI survey for the same month were unable to lift USD sentiment. Starting with the former; the payroll firm’s data indicated that 517K jobs were gained on the month, a little below expectations for ADP’s data to show 550K in job gains. Needless to say, however, more than half a million in job gains is pretty impressive. If the official labour market report on Friday confirms half a million in job gains, that would put total non-farm employment at roughly 143.5M, more than 13.5M above last April’s 130Mish lows, but still substantially below pre-pandemic levels of roughly 152.5M in total employment in the country.

Note that while ADP has not been particularly accurate in predicting the official NFP number over the past few months, it has helped to indicate the trend; i.e. ADP accurately predicted the stagnation in the rate at which jobs have been gained in the US into the end of 2020 and start of 2021, and may now be pointing towards the expected pick up in employment over the coming weeks. Wednesday’s ADP data should instill confidence in the market’s consensus prediction for 650K jobs to have been added to the US economy in March.

Turning now to Chicago PMI; the headline index surged to 66.3 from 59.5 in February, well above expectations for a rise to 60.7. The strong data comes in wake of a string of other strong manufacturing surveys for the month of March, be that the regional Fed surveys or last week’s preliminary Markit PMI report and adds further upside risk to the market’s expectations that Thursday’s headline ISM Manufacturing PMI will come in at 61.3. Despite not showing any positive reaction to the above, the dollar did show some minor signs of weakness in wake of a significantly worse than expected February Pending Home Sales release; pending sales tanked 10.6% on the month, much larger than the expected drop of 2.6%.


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