- Spot silver is back up to $23.20 as precious metals continue to shrug off headwinds of higher yields.
- Silver is trading over 3.0% higher this week as US CPI emerges and could inspire new bets on Fed tightening.
Spot silver (XAG/USD) rebounded convincingly above $23.00 on Tuesday after attracting buyers when it faced a 50-day moving average at $22.80 earlier in the session. At current levels, XAG/USD is trading around 0.9% higher on the day at $23.20 and near its 21-day moving average, with spot silver prices shedding a slightly stronger dollar and US bond yields rising. US yields rose a similar range along the curve (3-5 basis points) on Tuesday, with 10-year bonds hitting 1.97% for the first time since August 2019, despite failing to make a clean break above resistance in the form of the US dollar Highs in the fourth quarter of 2019 were in the 1.96% range.
The rise in nominal yields was partly due to a rise in real yields, which would normally be negative for precious metals without inflation-hedging yields like silver. Higher real yields mean 1) an increase in the opportunity cost of holding non-yielding assets and 2) a cheaper alternative form of inflation hedging. But the negative correlation between stocks like silver and yields has been weaker of late, confusing analysts.
Some have said inflation worries remain elevated as energy prices continue to rise and the Fed is “behind the curve” amid worries. Others have cited geopolitical concerns as driving safe-haven demand (though certainly not in bonds). Anyway, as US CPI data looms, which could push US yields even higher if it spurs further bets on Fed tightening, XAG/USD is trading over 3.0% higher this week . That represents a recovery of more than 5.5% from last week’s lows of $22.00, which marked a double bottom for the year.
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