Silver: Extends its recovery as US$ retreats on soft US job report

Silver prices rebounded on Warsh's remarks in the ECB panel discussion on July 1, and a weaker-than-expected nonfarm US payroll report for June.

Silver price outlook by Mirae Asset Sharekhan

Silver Performance:  In the last few weeks, spot silver has been under tremendous selling pressure due to rate hike narrative. It fell more than 50 per cent from its record peak of $121 as it slumped below $60 mark. However, of late, the metal has been repeatedly finding support in $55-$57 range.  It rebounded on Warsh's remarks in the ECB panel discussion on July 1 and extended its gains on Thursday on a weaker-than-expected nonfarm payroll report for June.  Geopolitics and oil:  Iran and the United States concluded ​a round of indirect talks on Wednesday. Discussions centred around maritime traffic in the Strait of Hormuz and unfreezing Iran's funds, two critical issues under the initial agreement. The nuclear program did not come up in the talks.  The next meeting between Iran and US negotiators will take place after July 9 funeral processions for Iran's late Supreme Leader Ayatollah Ali Khamenei, the Qatar ministry added.  Brent crude oil fell to four-month low on July 2 on Iran talks and improving traffic through the Strait of Hormuz. Iran has exported more than 40mn barrels of crude oil since the United States lifted its naval blockade on Iranian ports under a temporary peace agreement signed on June 17.    Data roundup:  Much-awaited US nonfarm payroll report for June released on Thursday showed that US hiring has lost some of its momentum seen in the previous months as employers added 57K jobs - much lower than the expected 113K jobs.  Two-month payroll net revision stood at -74K jobs, which took the 3-month job average down from 164K in May to 111K in June. Average hourly earnings at 0.3 per cent m-o-m and 3.5 per cent, respectively, matched their median forecasts, though earnings improved from 3.4 per cent y-o-y gain in May.  Another positive point about the report was a dip in the unemployment rate from 4.3 per cent to 4.2 per cent (prior 4.3 per cent). Labour force participation rate dipped from 61.8 per cent to 61.5 per cent. Weekly job and factory order data were somewhat better than expected.  The US ISM manufacturing data released on Wednesday showed that manufacturing expanded for the sixth straight month in June, though the Index came in at 53.30 Vs the estimate of 53.90 and prior 54.  Eurozone's unemployment rate was noted 6.2 per cent in June (prior downwardly revised 6.2 per cent, forecast 6.3 per cent).  Check Here Silve Price Updates    European central Bank forum in Sintra, Portugal:  The Fed Chair Warsh, upholding Fed's independence, once again stressed at price stability. He observed that inflation has come down in four weeks, though he did not specify the inflation metric. He refused to give any guidance on the Fed's interest rate outlook.  Warsh emphasized the Fed's autonomy in determining the proper policy course. Referring to the monetary policy decisions, he added that the Fed is going to chart a new course and it was too early to judge whether current investment surge in technology is generating broad-based inflation. Sticking to his long-held views, he said that AI-led supply boom will drive productivity (which is expected to reduce inflationary pressure, as per his views stated frequently)  The ECB’s President Lagarde said that risks to the Eurozone’s growth and inflation risks were broadly balanced now. She does not find urgent rate hike necessary to curb inflationary pressure.  Dollar Index and yields:  The US Dollar Index eased on weaker-than-expected NFP report. At the time of writing this report, the Us dollar Index at 100.79 was down 0.6 per cent for the day. Japanese Yen gained on July 2 on concerns about a possible intervention by the Japanese authorities as currency slumped to the lowest in more than four decades. Stronger Yen also weighed on the Dollar Index.  Two-year US yields at 4.12 per cent were down 1 per cent for the day, while 10-year yields once again edged lower from the 4.5 per cent mark and were largely steady.  Rate hike probability:  Following the US monthly job report, implied overnight rates futures now indicate the rate hike to happen in December rather in October, while odds of another rate hike in April fell from 80 per cent to 55 per cent. Similarly, odds of the ECB hiking rates in early 2027 have come down. Likewise, traders have pared their bets on the Bank of England hiking rates this year/early 2027.  ETF and COMEX Inventory:  As of July 1, total known global silver ETF holdings stood at 782.97 MOz-- lowest since July 2025-- as holdings have declined 80MOz YTD.ETFs have seen a net outflow of nearly 50 MOz since the beginning of the Iran war in February-end.  Registered COMEX inventory at 93.01 MOz has recovered from the cycle low of 75.71 MOz seen in April and now stands at the highest level since mid-February.  LBMA lease rate:  One-month LBMA rate at 0.1 per cent does not indicate any supply concerns.  China's silver inventory:  Shanghai Futures Exchange on warrant silver inventory stands at 827 tons, up sharply from the cycle low of 252 tons seen in November, though it is still at decade-low level. Silver outlook: 60/ 59 62 63.60.  Upcoming data:  Major US data on deck in short term include June ISM services (July 6), June 20 weekly ADP employment change (July 7) and June existing home sales (July 9). FOMC minutes of the June 17 FOMC meeting will be released on July 8. China's June PPI and CPI will be out on July 9. Traders will also monitor Eurozone's and UK's June final services and Composite PMIs to be released on July 3.  Outlook:  The Fed Chair Warsh’s remarks on inflation, lower oil prices and weaker-than-expected US nonfarm payroll report may help the metal extend its recovery. However, upside is expected to be capped as markets still look for rate hikes.  Silver may extend its recovery to $64 in short term. Immediate resistance is seen at $62, while support is at $60/$59.      (Disclaimer: This article is written by Praveen Singh, head of commodities, Mirae Asset Sharekhan. Views expressed are his own.)