Silver Price Weakness has a Strong Support Level Near
By Martin Lam
Market Overview
The recent decline in silver prices during late January has raised concerns about finding a robust support level, even amidst record inflows into both gold and silver markets. The XAGUSD pair is currently showing strong support around the $70.00 mark, which may be tested if the recent buying momentum diminishes.
ETF Inflows and Market Dynamics
January witnessed unprecedented inflows into gold ETFs, totaling $19 billion, marking the highest monthly inflow on record. This surge in investment has pushed ETF assets under management to a new peak of $669 billion, with total global holdings increasing by 120 tonnes to reach 4,145 tonnes, also an all-time high.
Such record highs often indicate peak interest levels, which can pose a risk of price peaks. Notably, all global regions reported inflows in January, with North America and Asia leading the demand. The US experienced its second-highest monthly inflow on record, while Asia set a new record. European investors also contributed significantly to this trend.
Impact of the US Dollar and Economic Indicators
The strength of the US dollar has negatively impacted the upside potential for precious metals, as traders have shifted their focus back to dollar-denominated assets. The dollar remained stable on a recent holiday in the US, which reduced trading volume. Upcoming FOMC meeting minutes are anticipated to increase market volatility later in the week.
Additionally, a lower-than-expected US inflation figure has heightened expectations for Federal Reserve interest rate cuts, with market participants now predicting a total of 75 basis points in cuts this year, starting as early as July. Any further indications of rate cuts in the FOMC minutes could provide a boost to metals prices.
About the Author
Martin Lam is the Chief Analyst for Asia Pacific at ATFX, bringing over 20 years of experience in global forex and investment markets. He holds a degree in Finance and Economics from Deakin University and has held senior positions at leading FX brokerage firms.