Rising Yields Melt Silver in Asia

Fridays bond sell-off sends commodities and precious metals lower in Asia. Watch global bond yields ahead of Jackson Hole.

Monday mornings at 6 am Singapore can be an emotional time for traders. The fact that many of us are at work then aside! Monday 6 am is a magical witching hour when electronic trading starts the week on products such as the S&P, Oil, US Bonds and Precious Metals. Significantly it is also the time that Tokyo (7 am Tokyo) Brokers switch on their margin servers. As a result price action can be “robust” to say the least as the market reacts to weekend news or to price movements in FX from late New York or early Asia. (2 AM Singapore for those poor FX dealers)

If the market gaps or prices move significantly this can trigger a sudden rush of margin stop outs by  either the US Futures Exchanges or Japanese Margin Brokers in a particularly illiquid time of the week. The resulting price action can create a perfect storm type atmosphere where illiquidity, large moves combine to exacerbate even more moves and more stops etc in a very unvirtuous perfect circle.A prime example being the 20% USD/ZAR move in 30 minutes in January.

This appears to be what has happened in a few markets this morning. Most notably Silver where the semi-precious metal opened and immediately sold off nearly 3 % in as long as it took me to type this sentence.

A picture tells a 1000 words….

We have since made a small recovery.

News wise we didn’t have a lot out over the weekend apart from some Kuroda comments.

Kuroda Says ‘Sufficient Chance’ for More Easing in Sept.: Sankei

This was certainly enough to see USD/JPY gap higher on the Spot FX open to 100.90. Yellen’s Jackson Hole speech will be written about ad nauseam this week but for me the most significant driver were,

  1. Very extended and stale XAG positioning.
  2. The global bond sell-off (higher yields) we saw to finish the week.

XAG/USD longs have consistently been our most extended long positions amongst any of the precious metals and FX crosses for the last few months. Indeed after this mornings washout, it remains the most popular long amongst our clients’ percentage wise.


This isn’t actually a huge change from Friday much to my surprise and tells me that we still have a lot of long positioning out there. The daily chart makes for gruesome viewing as well with a sea of red on the candles for the last two trading sessions. Bond markets need to be closely watched today for signs of a continuing sell-off. Combined with the factors above this could see more downside pressure on Silver.

Support comes in at 18.8000 the 100-day moving average, then 18.7150 days low and then 18.5000 the bottom of the Ichi moko cloud.

Resistance is at 19.30 days open and the New York low.


Similar set ups in Silver seem to be at play in commodities today. ie extended positioning and higher rates. Certainly, Oil didn’t enjoy the 6 am open either.


and WTI….

Interestingly both “oils” bounced from their lows suggesting the OPEC  nirvana of productions cuts they’ll actually stick to contains the downside for now.


and Gold

Two Year US T-Notes are back to pre Brexit levels

As are US 10 Year Bonds

Even Bunds were sold!


Part of the bond sell-off story is definitely attributable to the street looking for some Fed Funds fire and brimstone from  Ms Yellen this Friday in Jackson Hole.  Another part may  be the increasing perception that Central Bank monetary policy globally may be reaching its final stages of marginal utility as I have touched on before. But perhaps the lesson to be learned here is that nothing goes up forever and how acutely sensitive commodities, stocks and precious metals are to any sign of rising yields globally.

As I have said above watch global bonds this week. I am in no way calling the top of the global bond market but they are most certainly nsetting the short term agenda for everything else it seems ahead of Friday.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley