Silver Price Retreat Triggered by Higher Bond Yields

Higher oil prices provided some net support to silver, but the impact was more than offset by a fresh surge in bond yields and sharp dollar gains late in the European session with prices ending lower. Silver prices consolidated around $16.70 per ounce during the Asian session on Wednesday.

Oil prices surged higher in Europe with WTI advancing by close to 8.0% as OPEC reached a deal to cut production levels. The strong gains had a mixed impact on silver prices as volatility increased. Although there was support from gains in industrial commodities, the impact was offset by a fresh surge in bond yields and a generally strong US dollar tone while equities also advanced.

Given the mixed influences, silver prices were confined to relatively narrow ranges with a gradual drift lower to $16.70. There was a stronger than expected reading of 216,000 for the ADP employment report compared with a consensus forecast of nearer 160,000, although the October reading was revised down to 119,000 from 147,000.

The PCE inflation data was in line with expectations with the core annual rate held at 1.7%, still below the 2.0% target. There was a stronger than expected reading for the Chicago PMI index at 57.6 from 50.6 previously; this was the strongest reading since early 2015.

Silver briefly touched the $16.80 area early in US trading before moving sharply lower. The US currency gained renewed support and there were notable gains following the London fix as latent buying interest dominated once again.

USD/JPY advanced strongly to near 114.50, the highest level for close to nine months and there was further upward pressure on bond yields.

This combination undermined support for silver and the impact was amplified by downward pressure on gold, which dipped below the important $1.180 support level. In this environment, silver declined to lows close to the $16.50 level at the European close.

Trends in the dollar and bond yields will continue to be watched closely with the US ISM manufacturing data due on Thursday ahead of Friday’s employment report. The oil-market dynamics will also continue to influence overall market trends and silver developments.

Silver Price 4-hour Chart

silver 30-11-16

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.