22 July 2020

Investors Receive Returns on a Silver Platter

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News shaping
the markets today

     

What’s happening: Silver prices surged on Tuesday to record their highest close in six years.

What happened: Trading in precious metals has reached almost unprecedented volumes amid uncertainty related to the coronavirus outbreak. With no certainty of the duration or extent of economic impact of the pandemic, investors scurried towards safe-haven options.

Silver, which is looking to catch up with gold’s strong performance, has gained more than 80% from this year’s lows. Apart from the safe-haven status, silver prices were also boosted by some recovery in certain economies, lifting demand for this industrial metal.

Why it matters: Silver prices have been tracking the strong performance of gold, which has also climbed to its highest level in around nine years.

Metal prices have been spiking due to the continued rise in covid-19 cases, which has put pressure on governments of various countries to announce new fiscal stimulus packages. These massive stimulus packages and rock-bottom interest rates have triggered inflation concerns, which typically boosts trading in precious metals.

Silver prices were supported yesterday by EU leaders announcing a massive €750 billion budget and rescue-fund to lift the worst-hit economies in the region. Expectations for additional stimulus from the US government also boosted the white metal.

Meanwhile, silver’s safe-haven rival – the US dollar – failed to find support. The ICE US dollar index, which measures the greenback’s performance versus a basket of other major currencies, declined 0.8% to reach 95.10 on Tuesday.

Silver for September delivery jumped 6.8% to end the trading day at $21.557 an ounce on the Comex, marking its highest close since March 2014. The industrial metal has jumped 83% from the year’s low level of $11.772 an ounce seen on March 18 and is up around 20% year to date.

August gold gained 1.5% to finish at $1,843.90 an ounce on Tuesday, rising 21% year to date.

Gold is not far from hitting an all-time high, which stands at $1,891.90 an ounce recorded on August 22, 2011. However, silver futures still have a long way to go to reach an all-time high settlement of $48.599 an ounce set in April 2011.

What to watch: With investors expecting another stimulus from the White House and covid-19 cases continuing to surge, silver prices are expected to remain supported in the days ahead. Silver futures traded up 5.3% to $22.695 during the European session.

The Markets Today

     

US stocks will be in focus today, ahead of a basket of economic reports scheduled for release later in the day.

Context: US markets closed mostly higher on Tuesday after various companies reported strong earnings results for the latest quarter, while investors also hoped for another round of fiscal stimulus.

Details: With the European Union announcing a historic package to help member countries recover from the coronavirus-led crisis, investors look towards additional stimulus from the US.

Meanwhile, the Chicago Fed National Activity Index jumped to a new record high of 4.11 in June, versus May’s reading of 3.5.

Shares of Coca-Cola and Lockheed Martin rose more than 2% on Tuesday, after the companies reported stronger-than-expected results. Philip Morris International’s stock climbed over 4% after the company reported upbeat sales and earnings for its latest quarter.

The Dow Jones index added 159.53 points to settle at 26,840.40 on Tuesday, after rising as high as 27,025.38 earlier in the session, led by gains from Chevron and Boeing. The S&P 500 index rose 0.2% to 3,257.30, with energy shares spiking more than 6%.

The Nasdaq 100 closed lower, however, declining by 0.8% to 10,680.36, after reaching an intraday high of 10,839.93. Amazon’s shares lost around 2% on profit taking, after a rally in the previous session.

What to watch: Investors await data on house price index and existing home sales. Sales of previously owned houses, which declined 9.7% to an annual rate of 3.91 million units in May, are expected to surge 24.5% in June.

Investors will continue to assess the daily covid-19 numbers, with the total cases in the US swiftly reaching the 4 million mark.

Other Markets: European indices were trading mixed at 8:30am GMT, with the FTSE 100 and French 40 down by 0.1% and 0.2%, respectively, and the Dax 30 index higher by 0.2%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Canada’s inflation rate as well as the US MBA mortgage applications and EIA’s crude oil stockpiles.

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