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Silver prices have recently fallen below the level before the British referendum to leave the European Union, mainly due to increased investor expectations that the Federal Reserve will soon raise interest rates. While low interest rates mean the opportunity cost of holding precious metals is low, when interest rates rise, this opportunity cost will also increase. The yield on 10-year government bonds is closely related to the market's implied probability of multiple interest rate hikes per year, but not to the probability of only one interest rate hike.
In fact, after the Federal Reserve’s interest rate meeting last month, the market’s expectations for interest rate hikes have actually cooled down. Yellen’s speech was also cautious and did not reveal the meaning of tightening. Dudley, the third largest figure in the Federal Reserve, also said that he should be cautious about raising interest rates. , but why did the Federal Reserve suddenly release a hawkish message during the Golden Week?
The market believes that this may be related to the United States' desire to maintain the credit status of the U.S. dollar. On the one hand, the bearish view of the U.S. economy and the RMB's entry into R have affected its pace of interest rate hikes. On the other hand, the European Central Bank's tightening expectations have increased, and there is news that in order to end quantitative easing, the European Central Bank may gradually reduce bond purchases. From the perspective of the status of the U.S. dollar, compared to global negative interest rates and competitive currency depreciation, the Fed is actually most afraid of other central banks raising interest rates or tightening currencies. The Federal Reserve suddenly released a hawkish signal to reduce the possibility of monetary tightening in other markets.
Of course, the drop in silver prices during the National Day is also related to technical stop-loss orders. The silver price first fell below the US dollar integer mark, and then fell below the support of the volatile month. The US dollar finally appeared due to strong stop-loss orders. This caused panic selling in the market. The market has been constant. ~ The US dollar's breakthrough, the market itself has greater hope for the silver price to break through the US dollar, and the silver price has stood on the US dollar many times midway. However, unexpected news suppressed the price of silver, which fell below the US dollar. The confidence of bulls in the market was wiped out. A large number of stop-loss orders were the fundamental factor leading to the decline in silver prices.
However, some analysts believe that the panic spreading in the market is not actually caused by the sell-off triggered by the European Central Bank's tapering, nor is it caused by the influx of hedgers in some gold mining industries. In fact, it is more likely that a large hedge fund lost control and was forced to liquidate, which then triggered selling following the trend.
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