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Silver sharply off highs but retains $24.00 handle amid choppy Friday trade

  • Silver trades sharply below highs made at the start of the US session, but holds onto decent gains on the day.
  • Significant upside was seen in precious metals markets as US Treasury Secretary Mnuchin spoke prior to the US open.

Silver (XAG/USD) started off strong on Friday, rallying through the Asia and European morning session. Amid comments from US Treasury Secretary Steven Mnuchin on the reasoning behind his decision not to authorise a continuation of Fed emergency lending programmes beyond the 31st of December and repatriate the associated funding back to government coffers, there was a spike across precious metals. XAU/USD shot higher from roughly $24.20 to briefly beyond $24.50, only to then sharply reverse over the remainder of the US session, falling back below pre-spike levels around $24.20. Still, the precious metal holds onto solid gains on the day of over 13 cents or more than 0.5% on the day.

Mnuchin triggers volatility in precious metal markets

Treasury Secretary Steven Mnuchin spoke live on CNBC today to address his decision not to renew the emergency Fed lending programmes. While speaking he emphasised that the government and the Fed still “have plenty of firepower left” and seemed to raise hopes of a breakthrough on a fiscal stimulus bill; “we'll be redoubling our efforts to sit down with Congress and get something done”, he said. With $455B coming back into government coffers from the Fed, this will reduce the need for further borrowing to fund spending commitments and thus might make passage of a stimulus bill more palatable for certain austere factions of the Republican party. Analysts argued on Friday that the increased possibility of further stimulus boosted the precious metal's appeal as a hedge against likely inflation.

XAG/USD find resistance at recent uptrend, implying bearish bias ahead

During Thursday’s Asia session, XAG/USD broke out of a short-term pennant structure. The uptrend of that pennant, linking the 4, 9 and 11 November lows, seemed to come into play again today as resistance around the $24.50 mark. Having now broken to the downside of and now retested this uptrend, the implied bias going forward is for silver to see more downside, likely meaning a test of this week’s lows at $23.63.

If the silver bulls do continue to push the precious metal higher next week, however, the most notable levels of resistance beyond Friday’s high just above $24.50 will be Wednesday’s high around $24.70 and the Monday open high just above $25.00.

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