China Covid-19 policies and Silver demand!

China Covid-19 policies and Silver demand!
Ahura Chalki
Ahura Chalki
Published on: 28.12.2022 18:33 (UTC)
Post reading time: 1.76 min

Economic uncertainty confusing investors. 

While Chinese U-Turn in its Covid restriction policies encourages investors and manufacturers, on the other hand, doubts about Beijing's transparency, especially with the re-increasing patient numbers, holding back the buyers. 

One of the main changes in Covid restrictions is reducing travel restrictions. The quarantine requirement for tourists has been removed, while Chinese citizens also can now travel more freely from January 8, 2023. However, officials in US and Japan announced that they might impose new COVID-19 measures on travelers from China along with the test upon entering the country over concerns about the "lack of transparent data" coming from Beijing.

On the USD front, uncertainty can help the US dollar to hold its gains ahead of the New Year holidays. USD Index movements directly affect recent trends in the Silver chart. US economic data ahead of the Fed's January meeting will be essential to watch. So far this week, data were mixed and increased the market uncertainty. 

This week's published data shows that US wholesale inventories in November rose 1%, exceeding market expectations of 0.4% and 0.5% for September. While these numbers show the records since August this year, it can also increase the number of consumers about unsold goods inventories. Besides that, actual Real Estate sectors' data also reflect the mixed condition there. While monthly prices were unchanged and better than the -0.8% expected decrease, it is still 9.8% higher annually. In addition, for the eighth consecutive month, the Dallas Fed's business activity index decreased and fell further to -18.8 in December.

While uncertainty and risk increase, the 10-year Treasury bond yields falling slowly under 3.85% after refreshing the six-week high the previous day. From the fundamental point of view, a significant price reduction is not reasonable as long as this uncertainty exists. However, price growth also requires more favorable economic conditions so that investors can show more interest based on the economic growth outlook and greater consumption of silver.

From the technical point of view, 21.50 USD is the critical pivot, but essential support sits at 18.00 US dollars. Bulls above 21.50 are in charge, and bears will enter the game under 18 US dollars.