Buy dip in Silver ahead of US Fed rate decision; support seen at Rs 99,200

Silver Rate Today, March 19: There may be some profit booking ahead of the US FOMC policy decision as the Central Bank may opt for a hawkish pause

Silver: Bulls eye $35 in near-term

 

Silver Performance:

 

Silver rose to a fresh cycle high of $34.23 on March 18 as it benefitted on geopolitical concerns and subdued yield.

 

China's stimulus, amounting to 4 per cent of fiscal deficit, and Germany going for nearly one trillion Euro of spending to fund its defence, climate-neutrality, and infrastructure investments are supportive for the metal.

 

Germany's Bundestag, the lower house of the Parliament, on March 18, approved a major constitutional amendment to loosen the debt brake policy.

 

Spot silver closed with a gain of 0.79 per cent at $34.02.

 

Geopolitics:

 

Israel launched airstrikes across Gaza, killing hundreds of people as the nation accused Hamas of refusing to release remaining hostages. The airstrikes brought an end to nearly 2-month long ceasefire. Israel also struck in Lebanon and Syria amid US-Houthis scuffle. Hamas accused Israel of overturning the ceasefire agreement that will put captives in Gaza at a risk. 

 

Meanwhile, the US President pressurised Iran to rein in the Houthis as the President said that every shot fired by the Houthis will be a responsibility of Iranian leadership.

 

Much-awaited Trump-Putin conversation was concluded on Tuesday. Vladimir Putin agreed to a limited truce as he agreed to halt attacks on energy objects in Ukraine. Russia and Ukraine will swap 175 prisoners each on March 19.  Read: Gold may hit $3,100 in short-term on hawkish pause by US Fed: Analyst

Data roundup:

 

US housing starts (February) rose from 1350K in January to 1501K in February 2025. Import price Index (February) rose 0.4 per cent (estimate 0 per cent) M-o-M and 2 per cent Y-o-Y (estimate 1.6 per cent). Export price Index rose at a slower pace. Industrial production (February) was up 0.7 per cent vs the forecast of 0.2 per cent, though the prior data was revised lower from 0.5 per cent to 0.3 per cent.

 

The ZEW Indicator of Economic Sentiment for Germany jumped to 51.6 (forecast 48.10) in March 2025, the highest since February 2022.

 

US data released on March 17 showed that retail sales advance (February), at 0.2 per cent, fell short of the forecast of 0.60 per cent, though control group data, whose components go into GDP came at 1 per cent, which topped the forecast of 0.4 per cent.

 

Upcoming events:

 

FOMC rate decision, due tonight, will be crucial for commodities. The Fed is expected to keep the overnight Fed Fund rates unchanged at 4.25 per cent-4.50 per cent with a hawkish tilt as inflation continues to remain elevated. It is to be noted that University of Michigan one-year inflation expectations (February) reached 4.9 per cent, the highest since November 2022, with 5–10-year inflation expectations reaching 3.9 per cent, the highest since 1993. This is despite the fact that CPI (February) rose at a slower pace. 

 

Nonetheless, CPI, ex-food and energy, at 3.1 per cent (estimate 3.2 per cent) remains way above the Fed's 2 per cent inflation target. At the same time, although PPI (February) was tamer than expected, prior data was revised higher and some of the PCE Price Index components in this data, Fed's preferred gauge of inflation, remained elevated.

 

Swiss National Bank and Bank of England will deliver their monetary policies on March 20. The former is likely to cut its key rate by 25 bps to 25 bps, whereas the latter is likely to hold the rate steady at 4.5 per cent. 

 

Silver ETF:

 

Total known global silver ETF holdings stood at 710.706MOz as on March 17, as holdings jumped over 4 MOz on March 17. However, unlike gold, silver ETF holdings are down nearly 7MOz YTD, which amounts to a decline of around 1 per cent.

 

COMEX Silver Inventory:

 

COMEX Silver inventory stood at 445.423MOz on March 17, which is the highest level on record, as delivery demand is leading to jump in COMEX silver inventory.

 

US Dollar Index and yields:

 

The ten-year US yields swung between 4.26 per cent and 4.34 per cent. Yields settled at 4.28 per cent, down nearly 0.29 per cent on the day, despite an encouraging US industrial production and housing starts data and a tentative progress in Ukraine peace initiative.

 

The US Dollar Index fell for the third straight day as it closed at 103.25, down 0.12 per cent on the day.

 

Germany's 10-year bund yields remained flat at 4.81 per cent despite the lower Parliament passing the huge spending bill. Germany 10-year yields have surged by nearly 50 bps in the last one month, which has helped the Euro/Dollar rise around 7 per cent in one month.

 

Silver Outlook:

 

Looming fifth straight year of deficit, huge stimulus in China and Germany, firm undertone in base metals, demand from AI data centres, green energy transition, and safe haven demand due to geopolitical factors and rallying gold are positive for the metal.

 

In the near-term, bulls eye the crucial resistance at $35 (MCX May contract). There may be some profit booking ahead of the US FOMC policy decision as the Central Bank may opt for a hawkish pause. Buying the dips for the target of $35 is the preferred strategy.

 

Support is at $33.30 (Rs 99,200)/$33 (Rs 98,200).

   

==============================

Disclaimer: Praveen Singh is associate vice president of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.