Silver: Being weighed down by a firmer US Dollar
Silver price performance:
Spot silver rallied nearly 10 per cent in the week ending February 27 to settle at $93.78. However, since then, the white metal has been subjected to intense selling pressure on rising US sollar and surging US yields. At the time of writing this report, the spot silver was trading at $81.71, down over 2 per cent for the day.
Data roundup:
Weekly US job data released on March 5 were mixed.
The recent US data have been largely encouraging. ADP employment change at 63,000 in February beat the estimate of 50,000, thus further dispelling some of the job concerns, though prior data was revised lower from 22,000 to 11,000.
ISM services Index soared to 56.10 in February -- expanded at the fastest clip since July 2022 (estimate 53.50, prior 53.80). New orders and employment beat the expectations.
S&P Global US manufacturing PMI (Feb. final reading) came in at 51.6 (forecast 51.4, prior 51.2).
ISM manufacturing surged to 52.4 in February vs the estimate of 51.5 and prior reading of 52.60. It is the quickest pace since August 2022.
US Dollar Index and yields:
The US energy independence and rising risks to the emerging markets due to the ongoing Iran war are leading to safe haven inflows into the US, which is supporting the US dollar.
At the time of writing this article, the US Dollar Index was trading with a gain of around 0.5 per cent at 99.21.
The US yields harden: Both 2-year yields and ten-year yields were up around 1 per cent for the day at 3.59 per cent and 4.14 per cent, respectively.
China's Two Sessions:
In an annual report presented by Premier Li Qiang at the opening session of this year's Two Sessions meeting of the National People's Congress (NPC) on Thursday, China set its 2026 economic growth target at 4.5-5 per cent, slightly lower than the 5 per cent pace achieved last year.
It is the lowest ever target as GDP target below 5 per cent has been set for the first time since 1991. The new target shows that the Party acknowledges challenges at home and abroad and intends to focus on high quality growth.
This development is somewhat negative for industrial commodities and silver as nearly 70 per cent of silver usages are industrial in nature.
IMF Warning:
On Tuesday, the International Monetary Fund warned the war could worsen the global economic outlook if drawn-out fighting causes energy prices to spike.
ETF and COMEX inventory:
Total known global silver ETF holdings at 829.78 MOz, down nearly 3 per cent YTD, have remained flattish since the Iran war broke out.
COMEX registered silver inventory at 87.14 MOz is hovering around the lowest level in nearly two and a half years.
LBMA lease rate:
One-month LBMA lease rate at 1.52 per cent is in the familiar range seen since mid-February.
Upcoming data:
Major US data on tap in near term include crucial nonfarm payroll report (March 6), retail sales (March 6), February CPI (March 11), January PCE Price Index (March 13), final Q4 GDP (March 13), University of Michigan sentiment and JOLTs job openings (March 13).
China's February CPI and PPI data due on March 9 will also be in focus.
Silver price outlook:
US nonfarm payroll report to be released on March 6 will be quite crucial for the financial markets.
China's 2026 GDP target is somewhat bearish for the metal.
Silver expected to see continuing selling pressure unless US nonfarm payroll data disappoints/the Iran war spreads to the extent that other gulf countries also get involved.
Silver may test the support around $77 in the short-term, a decisive breach of which will open the way to test the major support band of $72-$74.
Resistance is at $87/$92.
It is advisable to sell into rallies with a tight stop loss.
Swings in USDINR are to be monitored. The USDINR may strengthen yet again following the RBI's intervention on March 5.
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Disclaimer: This article is by Mohammed Imran, research analyst. Mirae Asset Sharekhan. Views expressed are his own.
 "Stronger dollar, lower China GDP forecast weakens Silver outlook: Analyst")
