XAG/USD hits more than 2-month high above $23.50 after 1-week US data

• Spot silver rose to more than a two-month high of over $23.50 in recent trade, according to a weekly NY Fed manufacturing survey.
• The move performs against higher US yields and a stronger US dollar, suggesting the gains could prove short-lived.

Spot silver (XAG/USD) prices rose nearly 60 cents in recent trading from under $22.90 to nearly $23.50 (more than a two-month high) on the back of a much weaker-than-expected New York Fed Manufacturing survey in January . The headline index plunged into negative territory for the first time since October 2020 while expecting a decline to 25.7 from 31.9, reflecting the near-term deterioration in Omicron’s business conditions. At current levels just below $23.50, XAG/USD is now trading almost 2.0% higher on the day after trading lower at a point closer to 1.0%.

Silver’s recent rally, which has seen the metal rebound from its 21-day moving average at $22.80 and surged above its 50-day moving average just below $23.20, is cutting against moves in bond markets. and foreign exchange markets. Undeterred by the weak New York Fed survey, bond market participants have continued to push US yields higher, instead focusing on the Fed’s increasingly hawkish expectations. The 2-year yield is up over 1.0% for the first time since February 2020 and is up around 6 basis points on the day, while the 10-year yield is up around 8 basis points and is up around 1.85% The move is being driven by upside moves in real yields (rather than inflation expectations), which would normally weigh on precious metals.

Amid the rise in US yields that has outstripped moves in yields in other developed markets, the US dollar has caught a bid and the DXY, which recovered from initial post-New York Fed data weakness, is at weekly highs above 95 .50 pushed back. This makes dollar-denominated precious metals more expensive for international currency holders, which weighs on demand and would therefore normally drive down silver prices. Higher real yields and a stronger dollar suggest that spot silver’s recent bullishness may be short-lived. If intraday/swing traders take the opportunity to add short positions at elevated levels above $23.50, they will likely target a remnant of Tuesday and last Friday’s lows in the $22.80 area.