Silver Price Reverses US Retail Sales-Induced Spike

Silver spiked higher following the disappointing US retail sales data, but failed to sustain the gains and dipped sharply back below the $20.00 per ounce level.

Silver prices were unable to make any impression in late US trading on Thursday and there was a fresh dip early in the Asian session with a retreat below the important $20.00 level. After initially stabilising just below this level there was a fresh slide in early European trading with lows below $19.80.

The US retail sales data was weaker than expected with an unchanged reading for July compared with expectations of a 0.4% gain for the month. Underlying sales also fell 0.3% over the month compared with an expected reading of 0.2%. There was, however, an upward revision to the June headline data to 0.8% from 0.6%. Sales for the control group were unchanged following a 0.5% increase previously.

The producer prices data was weaker than expected with a 0.4% decline for July following a 0.5% gain the previous month with a core decline of 0.3% following a 0.4% gain previously.

The data overall cast further doubts surrounding the potential for any Federal Reserve move to raise interest rates. Following the data, there was a sharp rally in bond futures as US 10-year yields dipped below the 1.50% level once again. The dollar also came under pressure with USD/JPY declining to test support around 101.00.

There was a fresh rally in precious metals prices with gold spiking to test resistance above $1,350. In this environment, silver prices jumped higher with a spike back above the $20.00 level to a peak just above $20.20.

There was, however, a sharp reversal late in the European session with gold leading price movement once again with a slide back towards $1,340. There was a fresh rally in oil prices while the dollar pulled away from session lows and silver also fell sharply with a move back below the $20.00 p/b level to $19.90.

The latest CFTC positioning data will be watched closely over the weekend with trends in bonds, equities and the dollar watched closely at the beginning of next week. The increase in volatility is likely to trigger some further net reduction in long positioning.

silver 12-08-16

Tim is a contributing author to He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.