- Silver slides on safe-haven flows towards US Treasuries as bond yields fall
- The greenback takes a breather after reaching a 24-year high above 108.000, a respite for silver traders.
- The US 2s-10s yield curve screams recession, falling to 2007 levels at around -0.107%.
Silver (XAGUSD) remains on the defensive as Tuesday’s North American session progresses, down by 0.48%, due to increased concerns of the US getting into a recession, as the US 2s-10s yield curve remains inverted at -0.107%, reaching levels last seen in February of 2007.
At the time of writing, XAGUSD is trading at $19.01, after reaching a fresh two-year low around $18.75, bouncing off to the confluence of the 50 and 100-hourly EMAs around the $19.14-19 area, which put a lid on buying pressure.
Silver slides on safe-haven flows towards US Treasuries as bond yields fall
Risk-off dominates the session for a second consecutive day due to some factors. The inversion in the US 2s-10s yield curve deepened, below -0.10%, for the first time since February of 2007, accentuating recession fears that the Fed might tip the US economy into a recession. Also, the reemergence of China’s coronavirus crisis in Shanghai threatens to trigger additional lockdowns.
Silver traders are bracing for the US inflation report. The June Consumer Price Index (CPI) is expected to hit 8.8% YoY, while the core inflation, which excluded volatile items like food and energy, is estimated at 5.7% YoY, lower than May’s reading. In the meantime, the White House (WH) expects CPI to remain elevated, but downplayed recession fears, they said in a memo, as reported by Reuters. They added that the “Impact of energy and food prices on annual headline CPI in June will likely exceed 40%, based on market expectations.” They said the economy “appears” to be transitioning to a slower economic and job growth.
Elsewhere, the US Dollar Index, a gauge of the greenback’s value vs. six counterparts, falls for the first time in four days, down at 107.920, losing 0.27%, while the US 10-year Treasury yield sits at 2.937%, losing six bps.
What to watch
During the week, the US economic docket will feature the US Consumer Price Index and the Beige Book on Wednesday, followed by Thursday’s PPI and Initial Jobless Claims. On Friday, the University of Michigan Consumer Sentiment will portray the American people’s economic expectations.