Silver prices are moving sharply higher this morning as buying in cash markets, as well as short covering are featured. As of this post, silver prices are back firmly above the $17 per ounce level while gold prices have reclaimed the $1200 mark.
Recent volatility seen in global bond markets may be one factor driving some buying in the precious metals. As an example, German ten year bond yields have climbed from a record .05 percent yield just a few weeks ago to a .69 percent current yield.
U.S. yields have been rising as well, with the benchmark 10 year note yield moving from 1.64 percent to its current level around 2.24 percent since the beginning of the year.
Rates have been moving higher as investors anticipate a hike from the fed. European yields have been moving up as some believe that inflation has bottomed and is likely to move up from current levels.
The speed of the rate rise has been a cause for concern, however. This ascent has driven some risk aversion, and has made stock investors a bit jittery.
Yields appear to be calming down a bit as of today, and markets will continue to pay close attention to the bond markets.
Silver is also likely seeing some buying interest on weak economic data. U.S. retail sales were released earlier this morning, and the number showed no change from April. A .2 percent rise was expected. Some of the core readings of this number, such as department stores and electronics and appliances, are of particular concern.
This trend of weak data both in the U.S. and in China may have markets thinking twice about the prospects of a rate hike. The U.S. Dollar Index dropped on the news, and dollar weakness may also be fueling buying in silver and gold.
The dollar index appears to have topped, and has been trending lower since March. If this weakness should continue, it could help pave the way for a possible upside breakout in silver.
Adding to the metal’s appeal is the ongoing uncertainty surrounding Greece. While the country did make two recent interest payments to the IMF, the Greek finance minister stated in a televised interview this week that the country is likely to run out of cash within a matter of weeks.
While talks between Greece and its creditors remain ongoing, it seems that there may be no agreement reached. A Greek default on upcoming payments may have a significant impact on global financial markets. The deadline on the country’s bailout extension is quickly approaching at the end of June, and without a deal in place the possibility of a Greek exit from the EU must be considered.
Silver remains within its recent trading range, and a break above the recent swing highs at $17.35 and $17.39 could trigger a potential run at the January highs around $18.50.