XAG / USD detracts from US inflation gains at three-month high below $ 25.00

  • Silver is pulling back from its multi-month high, recently only weakly offered.
  • Fears of reflation and Evergrande worries weigh on the mood.
  • US Bank Holiday could keep recent consolidation on the table.

Silver (XAG / USD) remains above $ 24.00, down 0.26% for the day after jumping to the highest levels last seen in August. The bright metal buyers are taking a breather on Thursday amid a calm Asian session after the US inflation figures fueled market volatility the previous day.

While the inactivity of the market could be linked to the off-day in US bond markets, Evergrande’s fears, as well as the US-China trade relationship, may calm traders going forward.

However, US President Biden showed willingness to tackle price pressures after headline inflation, consumer price index (CPI), hit a 30-year high of 6.2% YoY. According to Reuters, the head of state has named reversing the rise in inflation as a top priority.

Not only the US CPI, but also inflation expectations, as measured by the 10-year break-even inflation rate according to data from the St. Louis Federal Reserve (FRED), rebounded, renewing their highest levels since May 2006 on Wednesday.

While reflation fears underpin concerns about the Fed rate hike and weigh on sentiment, comments by Patrick Timothy Harker and Mary C Daly, respective presidents of the Federal Reserve Bank of Philadelphia and San Francisco, sought to defend the Fed’s doves. Mr Harker highlighted the possibility of a rate hike even during the throttling, while Daly of the Fed said it was premature to change how the rate hike is calculated, according to Reuters.

On the Sino-US trade deal, non-positive comments from US Trade Representative Katherine Tai ahead of US President Biden and his Chinese counterpart Xi Jinping’s virtual summit next week contributed to risk aversion. In addition, the talks that China’s ailing real estate giant Evergrande is officially insolvent as the DMSA – German Market Screening Agency (DMSA) is preparing for the company’s bankruptcy petition, according to Daily Express, weighs on the willingness to take risks.

Amid these games, 10-year US Treasury bond yields remain undecided by 1.57% after rising the most in seven weeks, while the S&P 500 futures are slightly down and the US Dollar Index (DXY) is up highest level since July 2020 remains undecided.

Moving forward, risk catalysts will be key to short-term trade direction amid a bright calendar and bank holiday in the US.

Technical analysis

Failure to provide a daily close beyond the September 2021 peak near $ 24.85 may pull the offering on the 100 DMA retest of around $ 24.15 at press time. However, the silver bulls remain hopeful until they see a clear break of a six week old support line, at the latest at $ 23.35. It’s worth noting that the $ 25.37 level of DMA adds to the upward filters.


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