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  • Silver has recovered back above its 21DMA at $24.25 and eyes the 38.2% Fibo from Monday highs to lows.
  • The precious metal remains at risk of further downside should vaccine optimism resurface.

In wake of large losses incurred on Monday that saw the precious metal slide from highs around $26.00 to lows below $24.00, silver has nursed a gradual recovery throughout Tuesday and XAG/USD currently trades close to highs of the day at $24.44, up roughly 30 cents or 1.2%.

Subdued silver weighs the latest vaccine developments

Precious metals markets were slammed on Monday following Pfizer and BioNTech’s announcement in the morning that their vaccine had shown 90% effectiveness in preventing Covid-19 infection and they would be pumping out 50 million doses by the year’s end, followed by 1.3 billion doses in 2021.

The news, which broke shortly before the mid-European session, sent gold prices as much as 5% lower at worst levels. Silver fared even worse, dropping over 8%. The two precious metals have since recovered from worst levels, but silver is still more than 5% lower on the week. Further positive news on the vaccine front, perhaps from fellow vaccine development frontrunners such as AstraZeneca/Oxford University, could give precious metal bears further impetus in the coming weeks.

Meanwhile, the implications of the latest vaccine news are yet to make themselves fully apparent. Markets now expect the faster distribution of effective vaccines to power a better than previously expected global economic recovery in 2021, hence the initial dash for risk assets such as stocks and out of havens such as gold and silver. But what does this news mean for central bank and fiscal policy in 2021?

Might US Senate Majority Leader Mitch McConnell, who is likely to still be in charge of a Republican Majority in the US Senate, push for smaller stimulus as a result? Might global central banks see the news as taking the pressure on them to act as aggressively via more QE?

These will be important questions for precious metals such as silver, which are typically boosted by central bank intervention to lower interest rates, and weakened by increased government spending that boosts the economy.

XAG/USD back above its 21DMA

As noted above, silver has continued to gradually recover losses made on Monday. In recent trade, the precious metal has managed to surpass its 21-day moving average (DMA) which resides at $24.36 and is now eyeing a test of the 38.2% retracement from this week’s high at $26.00 to this week’s low at $23.58.

To the upside, the 50% retracement from this week’s high to low sits just below $24.80, then there is the 50DMA at $24.92. Above that, aside from further Fibo retracement levels, there is not much by way of resistance prior to the highs set at the start of the week at $26.00.

To the downside, the $24.00 level proved decent support during Tuesday’s European session. Below that, there is Monday’s low of $23.58, followed by the 4 November 2020 low at $23.26, set when USD surged on election night on sudden fears of a US President Trump re-election, and the 29 October 2020 low at $22.60.