Silver price on range-bound trading amid declining US bond yields

on May 25, 2021
  • Silver price remains range-bound at its current $27.69.
  • It is under pressure from the political hurdles faced by the proposed US infrastructure spending.
  • Silver price is finding support in the declining 10-year Treasury yields, which are at 1.59.

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Silver price is range-bound as the proposed US infrastructure spending continues to face roadblocks on the political front. However, the prices are finding support in the declining US bond yields.  

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US infrastructure plan faces political hurdles

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Republican and Democratic US senators continue to differ on the proposed infrastructure plan. In addition to being a precious metal, silver has various industrial uses. For instance, as part of the projects embedded in Biden’s infrastructure bill, the installation of solar panels would heighten the metal’s demand.

Both political parties are in support of US infrastructure spending. However, the are yet to agree on the details of the bill. President Biden offered to reduce the funding from $2.25 trillion to $1.7 trillion. The move was a counteroffer to Republicans’ proposal to cut the spending to $568 billion.    

Declining Treasury yields

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On the other hand, silver price is finding support in the declining Treasury yields. At the time of writing, the benchmark 10-year US bond yields were down by 0.53 at 1.59. Since 19th May, they have declined by around 5.98%. the 5 and 30-year Treasury yields are also down by 1.24% and 0.71% respectively.

The plunge in bond yields come at a time when Fed officials have continued to downplay inflation jitters. On Monday, Kansas Fed President, Esther George indicated the need to avoid a “rigid formulation of policy reactions”. This is founded on the fact that economic conditions are changing.

At the same time, Atlanta’s Fed President Raphael Bostic has indicated that inflation is healthy for the US economy, especially since unemployment is still an issue. During his interview on CNBC’s Squawk Box, the Fed official stated,

“We are still 8 million jobs short of where we are pre-pandemic. Until we make substantial progress to close that gap, I think we’ve got to have our policies in a very strongly accommodative situation or stance.”

Silver price technical outlook

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Silver price has been trading within a range for about a week now. At the time of writing, the precious metal was down by 0.28% at 27.69. Notably, it is trading along the middle Bollinger band on the four-hour chart.

I expect the price to continue the current range-bound trading in the near term. The lower and upper borders of the horizontal channel will likely be along the lower and upper Bollinger bands at 27.41 and 27.96 respectively. A move below these limits will invalidate this thesis.

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