Spot silver (XAG/USD) prices ended Wednesday FX trade with gains in excess of 80 cents over nearly 3.5%, its best daily performance since 1 December, boosted by a dovish tone to Fed Chair Jerome Powell’s remarks in the post-FOMC rate decision press conference as well as technical buying. The precious metal nearly managed to make it as high as the $25.50 level but has slipped back to the $25.30s in recent trade.
Precious metals boosted by dovish Fed, low real yields, rising inflation expectations
A combination of intertwining fundamental factors continue to act in support of precious metal markets; US 10-year TIPS yields (the real yield on the US 10-year treasury) dropped as low as -1.03% on Wednesday in the aftermath of the FOMC, its lowest level since early September. The drop in real yields was driven (again) by a further jump in inflation expectations that saw the 10-year breakevens (market expectations for CPI over the next 10 years) rise to highs of 1.9159%, its highest level since April 2019. Inflation expectations continue to rise as Congressional leaders seemingly get closer to clinching a deal on further Covid-19 aid.
For reference, falling real yields raise the comparative attractiveness of holding precious metals compared to treasuries (bullish for silver), while precious metals are also seen as a hedge against inflation (hence rising inflation expectations are also bullish). Hence, the above developments in both outlined above were bullish for silver.
Powell was keen to emphasize that the FOMC’s ultra-accommodative policy stance is not going anywhere any time soon, and emphasized that if needed, the FOMC could deliver more stimulus (via increasing the pace of asset purchases or adjusting the weighted average maturity of purchases, he hinted). In other words, the Fed is not going to allow a significant rise in real yields anytime soon, confirmation of which seems to have given silver a boost. Indeed, the risk (if any) is tilted towards them buying more bonds (and putting more pressure on real yields), rather than less, as Powell was at pains to make clear.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 26.93.
The projected lower bound is: 23.73.
The projected closing price is: 25.33.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 91.3590. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 62.48. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 60 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 180.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 10 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAG= closed down -0.036 at 25.300. Volume was 8,900% above average (trending) and Bollinger Bands were 25% narrower than normal.
Open High Low Close Volume 25.350 25.390 25.160 25.300 2,927
Technical Outlook Short Term: Overbought Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 24.39 24.22 21.02 Volatility: 31 42 57 Volume: 293 59 15
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAG= is currently 20.3% above its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect very strong flows of volume into XAG= (bullish).
Our trend forecasting oscillators are currently bullish on XAG= and have had this outlook for the last 7 periods.