XAG/USD: As actual yields rise, silver`s collectable attraction can also suffer

Silver and XAG/USD fell around 0.3% in Asia and the bulls are under pressure to correct their strong bearish momentum in response to the minutes of the previous day’s FOMC meeting. The protocol has shown that accelerated rate cuts will give officials an opportunity to raise rates in March as soon as they arrive. There was a sharp rally but the dollar hit a bid on Thursday, which changed again midway through the New York session.

The DXY, which measures the dollar against a basket of major currencies, hovered in 96 zones overnight while 10-year US yields sampled a daily high of 1.7530%. St. Louis Federal Reserve Bank Governor James Bullard said at a meeting of the St. Louis CFA Society that a rate hike is expected in March. This brought the dollar back to life. “The FOMC is well-positioned to take the additional steps necessary to control inflation, including (a) allowing passive balance sheet outflows, raising interest rates, and adjusting the timing and pace of subsequent rate hikes,” Bullard said.

“With the real economy strong but inflation far above target, US monetary policy has shifted to more directly addressing inflationary pressures,” Bullard said. “The FOMC could start raising rates from the March meeting to better control inflation,” Bullard said. Depending on the circumstances, it may be postponed or postponed,” he added.

The next day, the market will be guided by Nonfarm Payrolls data. But given the Fed’s hawkish sentiment, factors other than shocks are unlikely to have an impact. “The COVID-19 surge at the end of December was too late to halt U.S. employment growth,” said TD Securities analyst In the short term, however, regardless of the data outcome, markets will continue to revise the latest data on the Fed’s balance sheet, which will continue to push up real interest rates and put pressure on precious metals. However, analysts at TD Securities assert that while gold and silver prices are under pressure, “containing growth in the money supply will further dampen demand for all collectibles, including silver coins.” It could potentially offset global macroeconomic headwinds for gold.
Instead, while silver prices appear more vulnerable from accelerated liquidation of ETF assets, CTA trend advocates are seeking to increase short selling in response to the escalating downtrend.