Silver drops to key level as USD rebounds
Some of the key commodity prices like copper, crude, gold and silver have fallen sharply today, because of two reasons. A rebound in US dollar has hurt buck-denominated assets, while concerns over China have weighed on the demand outlook for certain commodities. Both of these factors are unlikely to hold gold back from reach another record high, soon.
The latest data out of the US released today were not great, as jobless claims came in at 264K instead of 245K expected – a big miss. But PPI rose 0.2% month-over-month, weaker than 0.3% expected, providing more signs that inflation has peaked. Yet the dollar shrugged it off. The drop in US CPI to 4.9% should have also held the dollar back – and it has against the likes of the Japanese yen, but we have seen commodity dollars falling back against the greenback, while the euro has also struggled.
The laggards, including the AUD, are due partly to weakness in Chinese yuan and metals prices, with both copper (-4.0%) and silver (-3.8%) dropping noticeably today after benign Chinese CPI and PPI data overnight. The weakness in Chinese inflation data has intensified concerns about demand from the world’s second largest economy, where the recovery appears to be fading alarmingly. This was highlighted by a surprise 7.9% drop in imports on Tuesday, adding to the sluggish factory activity figures released last week.
The US dollar has also found some haven flows. Concerns over the US debt ceiling are rising, and credit is tightening. The latest talks between President Biden and top congressional leaders over the debt ceiling impasse saw no progress. The US could default on its debt obligations if no resolution is found within the next 3 weeks or so. That would be unthinkable. So, a bit of adverse market movement may be required to push lawmakers into making a decision.
Silver needs to hold above $24.00 to $24.50 key support area to maintain its bullish bias. At the time of writing, there were no signs of a bullish reversal here. The bulls looking to buy this dip must wait for a confirmed reversal signal on lower time frames.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
The latest data out of the US released today were not great, as jobless claims came in at 264K instead of 245K expected – a big miss. But PPI rose 0.2% month-over-month, weaker than 0.3% expected, providing more signs that inflation has peaked. Yet the dollar shrugged it off. The drop in US CPI to 4.9% should have also held the dollar back – and it has against the likes of the Japanese yen, but we have seen commodity dollars falling back against the greenback, while the euro has also struggled.
The laggards, including the AUD, are due partly to weakness in Chinese yuan and metals prices, with both copper (-4.0%) and silver (-3.8%) dropping noticeably today after benign Chinese CPI and PPI data overnight. The weakness in Chinese inflation data has intensified concerns about demand from the world’s second largest economy, where the recovery appears to be fading alarmingly. This was highlighted by a surprise 7.9% drop in imports on Tuesday, adding to the sluggish factory activity figures released last week.
The US dollar has also found some haven flows. Concerns over the US debt ceiling are rising, and credit is tightening. The latest talks between President Biden and top congressional leaders over the debt ceiling impasse saw no progress. The US could default on its debt obligations if no resolution is found within the next 3 weeks or so. That would be unthinkable. So, a bit of adverse market movement may be required to push lawmakers into making a decision.
Silver needs to hold above $24.00 to $24.50 key support area to maintain its bullish bias. At the time of writing, there were no signs of a bullish reversal here. The bulls looking to buy this dip must wait for a confirmed reversal signal on lower time frames.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
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