Rising US government bond yields are putting silver and gold under pressure

Tuesday, August 25, 2020 - 16:10
Point Trader Group
Rising US government bond yields are putting silver and gold under pressure

Silver is trading around $ 26.50 as it remains under pressure despite the US dollar's weakness.

The United States and China are discussing the first phase of the trade deal

US Trade Representative Robert Lighthizer and Treasury Secretary Stephen Mnuchin had a phone call with Chinese Vice Premier Liu He on Monday night on the US side "to discuss implementation of the historic first phase agreement between the United States and China," according to a statement issued by the Office of the United States Trade Representative. And the official China News Agency (Xinhua) confirmed.

This optimism put pressure on the precious metals that benefited from the safe-haven buying. Gold has settled below the Asian 20 average at $ 1945 and is still losing steam.

The US dollar index has returned to the level of 93 after a failed attempt to settle above the 20 average at 93.45. The weaker dollar is usually a bullish catalyst for silver as it makes it cheaper for buyers holding other currencies. Today, this positive catalyst is matched by a significant increase in US government bond yields.

Rising US government bond yields heralded a drop in precious metals, which have no interest. Higher yields on safe-haven instruments increase the opportunity cost of holding silver or gold as an investor with precious metals in the portfolio misses the opportunity to reap interest on the safe-haven bond.

Silver continues its downtrend near the closest support at $ 26.20. This support has already been tested numerous times and proven robust. If silver can reach below $ 26.20, it will gain more bearish momentum and head towards the Asian 20 average at $ 25.90.

The move below the exponential level 20 will present a serious problem for silver bulls as it will indicate that silver has lost its current bullish momentum. In this scenario, silver might quickly go to the next support level at $ 24.95.

On the upside, the technical outlook has not changed in recent trading sessions. Silver needs to cross the closest resistance level at $ 27.75 to gain more bullish momentum and continue the current bullish trend. If silver manages to rise above $ 27.75, it will head towards recent highs near $ 28.50.

As for gold, Powell is likely to explain in detail a set of measures aimed at pushing inflation up amid the Corona virus pandemic, which has been a burden on the United States. To follow the latest technical analysis, visit the following link: Here

For the fourth session in a row, gold futures prices are mostly trading sideways against a dip as traders await Fed Chairman Jerome Powell's speech in Jackson Hole, Wyoming on Thursday. Traders are also assessing the latest figures on the spread of the Coronavirus, and the stability of Treasury yields and the US dollar.

At 13:11 GMT, Comex gold futures for December are trading $ 1936.50, down $ 2.90, or -0.15%.

The impact on prices is also leading to an improvement in risk sentiment with hopes surrounding a possible COVID-19 vaccine and positive signs on the US-China trade front.

Powell prepared for a "heavy-handed" speech, to change the Fed's view of inflation

Volcker, chair of the Federal Reserve from 1979 to 1987, heralded a series of inflation-losing interest rate increases that dragged the country into recession but won the battle against pricing pressures and spurred a strong economic recovery.

Powell, the central bank chief since 2018, is likely to detail a raft of measures aimed at pushing inflation higher amid the coronavirus pandemic that has plunged the US economy into one of its darkest hours.

You can follow the economic calendar and the most important news exclusively on the Point website

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