【TOP1 Evening】Silver plunges more than 4.6%; Dollar hovers near seven-week high

Gold 

Spot gold eased on Tuesday, and the spot gold fell 0.54% to $1850.23 per ounce by 18:00 (GMT+8).

The retail investment frenzy in silver has left dealers from the United States to Singapore scrambling for bars and coins to meet demand.

Top Democrats in the U.S. Senate and House of Representatives filed a joint $1.9 trillion budget measure on Monday, in a step toward bypassing Republicans on COVID-19 relief before President Joe Biden met with Republican senators.

India slashed import duties on gold and silver on Monday in a surprise move that industry officials say could boost retail demand and curtail smuggling.

China's gold consumption fell by almost a fifth in 2020, the China Gold Association said on Monday.

Silver prices fell more than 4.6% on Tuesday as investors booked profits following a rally of as much as 11.2% to a near eight-year peak in the previous session.

Silver fell 4.61% to $27.656 per ounce by18:00 (GMT+8), 

Silver prices rocketed as retail investors, egged on by messages on Reddit, pile into the market in an attempt to push up prices.

The U.S. Commodity Futures Trading Commission (CFTC) is "closely monitoring" recent activity in silver markets, the agency's acting chairman said on Monday, as last week's volatility in securities markets spilled into trading of the precious metal.

Forex

The dollar hovered near a seven-week high on Tuesday, largely benefiting from a euro selloff overnight after coronavirus lockdowns choked consumer spending in Europe's biggest economy.

The U.S. dollar index fell 0.12% to 90.92 by 18:00(GMT+8).

The euro sank the most in 2-1/2 weeks on Monday after data showed German retail sales plunged by more than forecast in December, with the continent still struggling with vaccine rollouts.

The dollar gained even as stocks rallied globally, bucking a recent trend for the U.S. currency to decline when risk appetite improves.

Commonwealth Bank of Australia currency analyst Joseph Capurso said the blip in the correlation came down to the euro, and market sentiment would continue to drive the dollar's direction near-term.

"When people think about selling euros, invariably you get some buying of dollars, because the euro-dollar exchange rate is easily the most liquid in the world," he said.

Many see the dollar's rebound since early last month as a correction after its relentless decline -- the dollar index lost almost 7% in 2020 -- on expectations of a global pandemic recovery amid massive fiscal spending and continued ultra-easy monetary policy.

Elsewhere, the Australian dollar pared gains after the country's central bank said it will extend its quantitative easing program to buy additional $100 billion of bonds, a decision that many market players thought could wait until next month.

The Aussie last stood at $0.7625, almost flat on the day and off the day's high of $0.7662.

Crude Oil

Oil prices rose around 1% on Tuesday after major crude producers showed they were reining in output roughly in line with their commitments, extending gains for a market thrown out of kilter by weak demand during the coronavirus pandemic.

U.S. West Texas Intermediate (WTI) crude was at $54.299 barrel, rose 1.60%, Brent was down to $57.081 a barrel, rose 1.63% by 18:00(GMT+8).

Market analysts say the OPEC has been showing more discipline in keeping to its commitments as surging COVID-19 infections threaten any recovery in demand.

Also, voluntary cuts of 1 million bpd by OPEC's de facto leader, Saudi Arabia, are set to be implemented from the beginning of February though March.

Russian output increased in January but in line with the agreement on reducing production, while in Kazakhstan oil volume fell for the month. Both countries are members of the OPEC+ grouping that banded together to help support prices with production cuts.

Helping to support prices, a severe blizzard hitting a large area of the northeastern United States is pushing up demand for heating fuel.

Stocks

Stocks in Asia-Pacific were higher on Tuesday trade.

Nikkei 225 rose 271.12 points or 0.97%, close at 28,362.17.

S&P/ASX 200 rose 99.60 points or 1.49% to close at 6,762.60.

Hang Seng Index rose 355.84 or 1.23% to 29,248.70.

South Korea's Kospi rose 40.28 points or 1.32% to 3,096.81.

Taiwan capitalization-weighted stock index rose 349.96 points, or 2.27%, at 15,760.05. 

GameStop stock has defied gravity in the past and it could again, but there are some signs its stock may be topping out, some strategists say.

GameStop was down sharply Monday, off more than 30% at $225.

GameStop has had a wild ride. It surged to an all time high of $483 last week but appeared to run out of steam Monday, falling well below its Friday close of $325.

When viewing a stock that's had a long speculative run, it's important to look at the call options on the stock when it stops moving higher, said Julian Emanuel, chief equity and derivatives strategist at BTIG.

Call options, which allow but don't require investors to buy at a certain price, are basically bets the stock will continue to rise. Aggressive buying in those options can help speculative stocks go even higher until the options themselves become too expensive.

"The high price of the options themselves are likely to cause the stock to top and then selloff or at least go sideways and ultimately sell off as the speculative mania moves on to different areas," said Emanuel. "We're seeing this today in silver."

Two other factors depressing the stock are the reduction in short interest as investors were forced to cover shorts, and that brokers have restricted buying in GameStop, Emanuel added. That takes away an important source of demand, and speculative investors become less interested, he said.

"It seems the Reddit army is moving into a different area," said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. "The stock is going down and the volatility goes down."

"Usually when a stock goes down, volatility goes up," he said. "In this instance, as people leave and move into other areas, you're going to see the stock price and volatility go down."

The 30-day implied volatility in GameStop options on Friday was 430% but it declined to 375% and continues to fall, Murphy said. Implied volatility measures the expected swing in a stock's price.

That means investors are now expecting a move as big as 23% in the stock in one day in either direction, down from 27% on Friday.

Of course, GameStop has also been affected by trading restrictions.

Robinhood and other online brokers last week limited buying in GameStop but allowed investors to sell. Brokers raised margin requirements on GameStop and some other stocks.