Markets React as Tensions Rise Between White House and Federal Reserve Over Interest Rate Pressure 
Federal Reserve Faces Subpoena Delay Amid Investigation Into Chair Jerome Powell 
BOJ Policymakers Warn Weak Yen Could Fuel Inflation Risks and Delay Rate Action 
New York Fed President John Williams Signals Rate Hold as Economy Seen Strong in 2026 
RBA Raises Interest Rates by 25 Basis Points as Inflation Pressures Persist 
Bank of Canada Holds Interest Rate at 2.25% Amid Trade and Global Uncertainty 
Just last week, as it seemed like the month-long precious metals rally was potentially topping out, both metals received another boost courtesy of President Trump whose remarks that the US dollar was “getting too strong” sent the US dollar tumbling and US yields further retreating.
To make a long story short, a brew of a weakening US dollar and softening US yields spiked with investor anxiety over the last week approached nearly an ideal sweet spot for gold and silver bulls.
So where do we go from here? Overall, the baseline view does not contain a strong directional dollar view and we expect that a modest move lower in yields from here should be contained to the next couple weeks. We continue to see higher yields in the offing as the fundamental backdrop remains supportive.
These macro outlooks imply that while gold and silver prices could continue to be supported in the coming weeks they will likely adjust lower into the second half of this quarter ahead of a potential rate hike in June.
Turning to silver more specifically, money managers have added more than 35,000 contracts of net length in COMEX silver over the past three weeks, propelling their net long position to a record long level.
Unlike the recent boost in investor length on the COMEX, total ETF holdings of silver have remained lackluster and range bound
In terms of physical demand, higher prices likely led to lower sales of American Eagle silver coins which dropped by 47% yoy in 1Q17, according to the US Mint.
The Reserve Bank of India (RBI) reported relatively subdued 1Q17 imports of silver which, by our rough conversion, registered around a 15% yoy decline in 1Q17.
While questions still remain about how much additional physical demand will come from industrial sources this year, particularly photovoltaic installations after huge growth in 2016, we maintain our view that macro precious metals drivers like rates and FX will ultimately guide the price of silver in 2017.
