Silver Prices Hold Above $20.00 Despite Strong Risk Appetite

Although global market trends were generally negative for silver on Monday, prices again showed broad resilience with evidence of solid buying support on dips.

After finding support on dips to below $19.50 per ounce following Friday’s US employment report, silver opened with a firm tone in Asia on Monday as prices held above $20.00 with a peak around $20.75.

Overall fear levels remained lower in global markets following the US data report with the biggest increase in non-farm payrolls for eight months supporting confidence in the US outlook. Global risk conditions remained firmer on Monday as wider fears surrounding the global economy eased.

UK Conservative Party Leadership candidate Andrea Leadsom withdrew from the contest, which left  Theresa May as the only candidate, removing need for a ballot of party members. May will now formally be appointed Prime Minister on Wednesday and the removal of another layer of uncertainty had a positive impact on risk conditions.

There was a decline in US bond prices during the day with 10-year yields back above the 1.40% level. Investors, however, were still very doubtful whether the labour market data would push the Fed towards a short-term policy tightening with futures prices still indicating less than a 25% chance of a Fed rate hike by December.

The dollar maintained a firm tone with a move above 102.50 against the yen while the US currency index strengthened by over 0.30% on the day.

After Asian and European equity markets had made strong headway, the trend continued in US trading with the US S&P 500 index moving to record highs. Although the barrage of favourable trends did curb silver support overall losses were limited.

The US labor market conditions index remained in negative territory for June, although the rate of decline slowed with the data not having a significant impact. Similarly, Kansas City Fed President George’s comments that interest rates are too low also had little impact.

Silver overall drifted lower, but prices found support comfortably above the $20.00 level.

The latest CFTC positioning data recorded a further increase in non-commercial long silver positions to record highs, maintaining the potential for sharp position adjustment ant stop-loss selling if there is a sustained shift in sentiment.

Overall trends in risk appetite and developments surrounding the US economy will continue to be watched very closely with Fed speakers continuing to be a significant short-term focus.

Written exclusively for Gold-Eagle.com by Paul Rosenberg, market analyst for EconomicCalendar.com