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  • Silver prices catching up as bulls cheer developed nations getting back to work.
  • Silver’s industrial qualities giving the precious metals a lease of life again. 
  • Geopolitical tensions are in focus, although equities continue to climb. 
  • A focus on the Chinese yuan and the USD is in play. 

The price of silver is currently trading at $17.27, up 0.57% having travelled from a low of $17.16 to a high of $17.50 on the day so far. Precious metals have been correlated to equities of late. European equities maintained their upwards momentum throughout today’s European trading session (EuroStoxx50 +0.9%), while NA futures were only a slight improvement (S&P500 e-minis 0.3%). 

Cash, however, has been positive in the session so far, brushing off geopolitical tensions. While the safe-haven bid in gold has been less convincing of late, despite a weaker USD, silver has been able to play catch-up as industry metals cheer the reopening of developed nations recovering from the COVID-19 lockdowns. 

Silver and platinum alike managed to close deeper in the green, which highlights the relative strength of the industrial-precious metals complex in this environment. Strengthening commodity demand continues to support silver and platinum, particularly given that the metals also remain supported by investment demand,

analysts at TD Securities explained. 

In this context, we expect a continued buying program in both metals in response to firming momentum indicators, which could see both silver and platinum length grow deeper into positive net length territory. Notwithstanding, a break below $17.30/oz in silver would whipsaw the algos.

US/Sino trade war back in play, eyes on CNY

In other news, trade wars are firmly back on the table. Since the 18th century, the relationship between the US and China have been complex, and vary from positive to highly negative. However, at this moment in time, the US and China have not been so far apart in terms of their relationship since the Korean War in the 1950s. 

The relations initially deteriorated like a hammer under President Donald Trump, whose administration labelled China a “strategic competitor” starting with the 2017 National Security Strategy. Trade deal negotiations got underway and roiled markets until a phase 1 deal was finally agreed at the end of 2019. 

Meanwhile, Trump has since lashed out at China, blaming the world’s second most powerful economic power for the coronavirus and relations have again deteriorated dramatically. The latest development has serious implications for financial markets and risk appetite. China’s parliament just approved a decision to go forward with national security legislation for Hong Kong and the US has responded in kind.

The Trump administration has announced that it has cancelled visas for Chinese students with ties to military schools and has stripped Hong Kong of its special treaty status, certifying it as no longer autonomous. This opens the way for the Trump Administration to revoke special arrangements on trade. Therefore, this could have a significant impact on Hong Kong’s financial hub with wider ramifications for global markets linked to it.

We have already seen the first response from China in this regard. The value of the CNY has weakened vs. the USD which the US is likely to see as China weaponising its currency to support external trade.

The political importance of the USD/CNY exchange rate cannot be avoided and the Trump Administration would not take kindly to any sharp increase in the value of USD/CNY, 

analysts at Rabobank explained. 

This is a bullish environment for precious metals, although silver could find its self lagging that of its sister currency’s moves, gold. Silver tends to join the party late in a global recession, for its industrial use hamstrings its bullish performance. 

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