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Silver gets crushed by the very bullish US dollar

The event in Sintra has proven to be very market moving with the US 10 year yields once again on the rise along with the US dollar, which in turn is crushing the commodities and associated forex pairs

Market Wrap

Continuing home sales increased by 8.1% monthly and fell by 8.3% annualized in August, according to the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI) stood at 119.5. The Midwest contributed most to the increase, with sales in the region growing 10.4%, while Northeast PHSI rose the least, by 4.6%.

Following on from the US economic data the US dollar along with the yen and yuan are relatively strong against the higher-yielding commodity pairs and pound.

According to the US Energy Information Administration, commercial crude oil stockpiles in the United States decreased by 4.58 million barrels in the week ending September 24. The decline was worse than expected, and the stockpile fell to 418.5 million barrels. Last week, crude oil imports averaged 6.6 million barrels per day, representing an increase of 87,000 barrels from the previous week. This week, gasoline production reached 9.9 million barrels per day. Last week, the total commercial petroleum inventory rose by 10.9 million barrels. Inputs in crude oil refineries in the US increased by 67,000 barrels per day from the previous week to an average of 15.4 million barrels per day, while refineries operated at 88.1% of their total capacity.

The Brent crude oil benchmark traded at $78 p/b today having found support at the previous resistance swing high. From here the supply and demand dynamics are battling with the higher US dollar, so it is feasible that we drift sideways until we understand what is going on with supply chains, US dollars, and OPEC+ supply changes if any.

Today, precious metals prices were mostly lower, with silver having fallen over 4% at the time of writing. A slight recovery was seen in silver trading ending the London session trading for $21.60/oz but the higher inflation for longer comments from Fed Chair Powell added to the dump in precious metals. Platinum also saw losses at the same time, falling over 1.21% to below $957.03/oz while gold fell below $1,732.05/oz. Palladium was the only one to see some gains, rising 1.13% to change hands for $1,899.90/oz.

Chairman Powell noted in his Sintra speech today that inflation is likely to remain high later than initially expected due to bottlenecks and supply chain problems that "don't seem to be improving," adding that they are now expected to continue into next year. As a result of concerns over the Delta variant of COVID-19, Fed Chair Powell said the economic outlook was positive but nevertheless "highly uncertain." According to Powell, the Delta variant has "held up" progress in economic recovery, and expanding vaccination efforts and controlling the Delta strain are the "most important economic policies."

Every cloud has a silver lining and despite the economic uncertainty, 2022 is expected to be a "quite strong year" in which economic growth will be "above trend."

The US dollar jumped up to the $94.50 level of resistance we had discussed in the earlier market analysis video on, so it will be interesting to see if this is the final push to shake out the weak shorts or whether this is the pivot for the next move higher?


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