Silver Performance
On July 11, Silver surged on the US CPI data (June) trailing the forecast across the board as softening inflation boosted rate cut bets. The white metal rose to $31.75, the highest level since May 2024. It was trading with a hefty gain of nearly 2 per cent at $31.42 at the time of the MCX closing. The MCX September contract was at Rs 94,176 (LTP), up 1.45 per cent on the day.
Data and event roundup
Much-awaited US CPI data (June) trailed the forecasts on all counts as rents moderated: CPI M-o-M was noted at -0.10 per cent (forecast 0.10 per cent), CPI, ex-food and energy, M-o-M at 0.10 per cent vs the forecast of 0.20 per cent. CPI Y-o-Y at 3 per cent as against the forecast of 3.10 per cent, and CPI, ex-food and energy, Y-o-Y came in 3.30 per cent vs the forecast of 3.40 per cent.
The US CPI data has boosted the rate cut notion. September rate cut probability has risen to 93 per cent from 73 per cent seen a day before the CPI data release. The probability of two rate cuts by the end of the year stands at nearly 70 per cent now as traders look for a collective rate cut of up to 60 bps in 2024.
Fed Chair Powell has already indicated the Fed’s inclination to cut rates in his two-day testimony this week. In his testimony to the House financial services on Wednesday, he said that the Fed will not wait for the US inflation to hit 2 per cent to cut rates, though the Central Bank wants to ensure that the inflation will hit the Fed’s target of 2 per cent before they begin slashing rates.
He acknowledged the risks to the economy, which is not overheated anymore, should the Fed cut the rate too soon or too late.
The US Dollar Index and the US Yields
Both the US yields and the US Dollar Index slumped on jump in the rate cut odds. The ten-year US yields was down over 2 per cent to 4.19 per cent at the time of the MCX closing. The US Dollar Index was at 104.51, down 0.44% on the day.
ETF holdings and COMEX Silver Inventory
Total known global silver ETF holdings stood at 690.078MOz as of July 10. The COMEX silver inventory was noted at 298.496Moz as of July 10, the highest level since January 2023, which is somewhat negative for the metal.
Production cuts in China’s solar panels
Chinese solar-capacity expansion is set to slow in the second half of 2024 and 2025 on production cuts in solar panel industry. The demand surged by 55 per cent in 2023 and 52 per cent in the first five months of 2024. However, overcapacity in solar panels has pushed the prices down by 42 per cent; thus, leading to a production cut, which is somewhat negative for the metal. Rate cuts in the US and continuing stimulus measures in China may support the record high industrial demand for silver.
Upcoming data and event
Today’s major US data include PPI (June) and the University of Michigan consumer sentiments (June) and both short and long-term inflation expectations. Traders will pay attention to the Fed Chair Powell’s speech on Monday, too.
Silver outlook:
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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: Jul 12 2024 | 10:46 AM IST
