Silver – rises to three-week high
Performance
On Thursday, spot silver rallied to a nearly three-week high on Fed rate cut bets and firmer industrial commodities.
The metal rose sharply higher from its day’s low of $28.53 on a slight pickup in the US jobless claims, prior PPI data getting revised lower, surging gold and the European Central Bank cutting rates by 25 bps. The US data strengthened the rate cut notions.
Spot silver was trading with a gain of around 4 per cent at $29.82, at the time of writing this article while the MCX Silver December contract was at Rs 87, 274, up nearly 3.33 per cent.
Data round up
US Initial jobless claims came in at 230K Vs the forecast of 226K, while the previous data was revised higher by 1k. PPI (August) rose 0.2 per cent M-o-m Vs the forecast of 0.1 per cent, core PPI was up 0.3 per cent m-o-m Vs the estimate of 0.2 per cent. PPI y-o-y data were in line with the estimates; however, PPI (July) data were revised lower across the board, which boosted the possibility of Fed rate cuts, thus helping the metal.
Central Bank watch
As expected, the European Central Bank slashed the deposit facility rate by 0.25 per cent to 3.50 per cent as the Euro-zone’s economy struggles amid subdued inflation. The bank sees inflation as steady but flagged risks to the Euro-zone’s growth outlook and said that its future monetary decisions will be data dependent. Overall, it was a dovish outcome, which increased the possibility of multiple Fed rate cuts.
ETF and inventory
Total known silver ETF holdings stood at 718.663, nearly three-week high MOz as of September 11.
COMEX Silver inventory stood at 305.952 Moz as of September 11.
The US data to be released Friday include import and export price indices (August), University of Michigan sentiment (September preliminary) and University of Michigan inflation expectations.
US Dollar and yields
The US yields initially dipped on the US data; however, the decline was short lived. The ten-year US yields were seen 3.69 per cent, up over 1 per cent on the day, at the time of the MCX closing, whereas the two-year yields at 3.69 per cent were up around 1.35 per cent.
The US Dollar Index at 101.5 was down 0.10 per cent on the day.
Outlook
Prime mover of commodities markets is the upcoming September 18 FOMC meeting at which the US Fed is expected to start cutting rates. Although the latest CPI and PPI readings do not warrant outsized rate cuts, markets expect the Fed to cut rates by 100+ bps this year as the Central Bank has turned its focus on the weakening job market.
Buying the dips is the preferred strategy for the time being.
Resistance is at $30.11 (Rs 88,000) /31 (Rs 90,500). Support is at $29.20 (Rs 85,400) /$29 (Rs 84,800). A test of previous high at $32.52 is possible if the Fed is dovish in its monetary policy.
(Disclaimer: Praveen Singh is an associate vice president of fundamental currencies and commodities at Sharekhan by BNP Paribas. Views expressed are his own.).
First Published: Sep 13 2024 | 6:49 AM IST
