CFDs: Silver price bounces from 200-day Moving Average

“Some of the buying we have seen recently is not really driven by fundamentals, but is more momentum driven”, warns Dominic Schnider, head of alternative asset classes at UBS. “That should run out of steam – so we’ll see double digit declines on the precious metals this year.”

Yesterday silver suffered its biggest down day in two months, shedding roughly 2.6 percent of its value. The slump happened in a day, which lacked any major data releases, and the market buzz is that the move was triggered by Bank of America Merrill Lynch’s technical call to sell gold. The bank has two current downside targets, first at $1270, and then if it keeps dropping, at the long-term triangle support of $1185.

The US economic calendar today offers January’s Durable Goods Orders report and last week’s Unemployment Insurance Initial Claims, both due out at 13:30 UTC.

Market participants will also tune in to Fed chair Janet Yellen’s semi-annual monetary policy report testimony to the US Senate at 15:00 UTC. Yellen is expected to stick to the same opening remarks as those delivered in front of the House Financial Services Committee earlier in the month, but her choice of words will be carefully monitored by traders eager to gain insights into the greenback’s short and medium term future.

India’s silver premiums ease a tad

India’s government has clamped down on bullion imports to deal with the country’s ballooning current account deficit, but the restrictions have allowed only a handful of firms to import precious metals. The importers have imposed a premium for local buyers, arguing that it is meant to cover administrative and transportation costs.

However, analysts have argued that the premium reflects strong demand for precious metals in India, where consumers have to deal with Asia’s fastest-growing consumer price inflation and a tanking currency, with the rupee down roughly 13 percent against the US dollar over the past year.

Indian silver premiums have eased recently after news reports that the government is looking into easing import curbs on bullion purchases. The chart above illustrates the 5-day Moving Average of India’s silver premiums to London’s spot price, which have been in an uptrend ever since the rupee peaked against the greenback in 2011.

According to data from the Reserve Bank of India, Indians paid a record average silver premium of 162 percent in the 1990-1991 fiscal year, when a balance of payments crisis fuelled a massive slide in the rupee’s value.