Silver hits 10-month high on fears of lower output

Weaker dollar, bearish outlook on crude help precious metal surge 3% to cross $17 an oz in London

Silver prices touched the highest in 10 months on Tuesday in global markets as investors turned bullish towards precious metals on expectations of bearish crude oil with the Organization of the Petroleum Exporting Countries failing to achieve its deadlock over output freeze. Weaker dollar added to the sentiment. Domestic markets were closed on Tuesday on the occasion of the Mahavir Jayanti.

On the Multi Commodity Exchange, silver contract for near-month delivery touched Rs 39,650 a kg, a rise of 3.4 per cent or Rs 1,300 from the previous day. This level was not seen in silver after June 18, 2015.

“Zinc miners have announced production cuts resulting into a proportionate decline in silver output as well, silver being a byproduct of zinc. Apart from that, industrial demand of silver is expected to rebound after several years of resilience,” said an analyst with one of the leading commodity brokerage firms.

Spot gold in London rose 1.5 per cent to trade at $1,250 an ounce (oz) early afternoon as investors continued safe-haven buying in the absence of any alternate avenue. Strengthening European currencies including the euro and the pound against the dollar helped gold firm up. Silver followed suit and jumped nearly three per cent in London to trade at $17.05 an oz on Tuesday. These levels of gold and silver were not seen after May 2015.

“Traders can buy silver for short-term price expectations of $17.70 an oz,” said Ajay Kedia, managing director of Kedia Commodity Research.

Reflecting the sudden price increase in global markets, gold in the spot market here increased by Rs 100 to hit the psychological barrier of Rs 29,500 per 10 grams and silver at Rs 39,500 a kg. While gold in Indian rupee had seen this level above a month ago, silver has touched this level after 10 months.

Notably, Russia said on Tuesday it was considering raising oil production this year, possibly targeting a level of 540 million tonnes (mt) of crude against 534 mt produced last year. Also, Iran’s deputy oil minister Rokneddin Javadi said crude oil production would reach pre-sanction levels by June 20, 201.