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Positive Economic Data Likely to Support Silver Prices

Published 05/03/2021, 06:12 AM
Updated 07/09/2023, 06:32 AM

Silver was trading near $26.183, slightly higher from Friday’s closing on the backdrop of positive economic data which is supportive for industrial metal demand.

US Treasury Secretary Janet Yellen on Sunday stated that President Joe Biden’s plans for infrastructure, jobs, and families, will not cause immediate inflation. She said that the spending will be phased in over a decade.

Dallas Federal Reserve Bank President Robert Kaplan on Friday called for beginning the conversation about reducing central bank support for the economy, warning of imbalances in financial markets, and arguing the economy is healing faster than expected. This is likely to keep precious metals under pressure.

Meanwhile, China’s gold consumption soared 93.9% in the first three months from the same quarter a year earlier according to the China Gold Association.

On the economic data front, US Mar personal spending rose +4.2% m/m, against expectations of +4.1% m/m and the biggest increase in 9 months. Also, Mar personal income rose a record +21.1% m/m (data from 1946), against expectations of +20.3% m/m.

In addition, the Apr MNI Chicago PMI unexpectedly rose +5.8 to 72.1, against expectations of a decline to 65.0. The final-April University of Michigan U.S. consumer sentiment index rose +1.8 to a 13-month high of 88.3, stronger than expectations of 87.5.

Other global economic data were also supportive for industrial metals demand and silver prices. Eurozone Q1 GDP fell -0.6 q/q and -1.8% y/y, against expectations of -0.8% q/q and -2.0% y/y.

Also, the Eurozone Mar unemployment rate fell -0.1 to a 9-month low of 8.1%, showing a stronger labor market than expectations of 8.3%.

In addition, Japan Mar industrial production unexpectedly rose +2.2% m/m, against expectations of -2.0% m/m. Finally, the Japan Mar jobless rate unexpectedly fell -0.3 to an 11-month low of 2.6%, showing a stronger labor market than expectations of 2.9%.

Additionally, Eurozone factory activity growth reached a record high in April which is boosted by surging demand, driving a swell in hiring although supply-side constraints led to an unprecedented rise in unfulfilled orders. IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) rose to 62.9 in April from March’s 62.5. Silver prices found support on the back of positive PMI data in the eurozone.

However, recovery in the US dollar index and the United States 10-year Bond Yield is likely to cap the gains. The dollar index bounced from a low of 90.398 registered on Apr. 29 and holding near 91.188 after registering a high of 91.385 in the early hours today. The US 10-Year Bond Yield is currently trading near 1.626, which is sharply higher from a recent low of 1.531 registered on Apr. 23.
 
According to the CFTC Commitments of Traders report for the week ended Apr. 27, net long for silver futures increased by 1160 contracts to 42841 for the week. The speculative long position gained by 1213 contracts, albeit shorts also gained by 53 contracts.
 
Silver prices are rallying on increasing economic optimism from positive economic data across the globe. It is likely to trade firm while above 50 days EMA of $25.86, and 200 days EMA of $24.885.

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