Here's how to trade Silver on September 19; check resistance, support here

Silver: Fed rate cut paves way for eventually higher prices

Silver Performance:

• Spot silver closed with a loss of over 2 per cent at $41.67 MOz on September 17 as the US Dollar Index and bond yields spiked higher on the Fed Chair Powell's comments in his post FOMC presser. The Fed Chair Powell was cautious on possibility of tariff led inflation creeping higher and called the Fed rate cut a risk mechanism cut.
• The grey metal traded in the range of $41.19-$41.97 on September 18 and at the time of writing this report was seen changing hands at $41.79, up nearly 0.25 per cent for the day. The MCX December silver contract at ₹127,200 was up around 0.15 per cent.

FOMC’s monetary policy decision:

• Ten Fed officials called for 50-bps/more rate cuts, while nine called for fewer.
• Newly appointed Fed governor Stephen Miran, the only dissenter, voted for a 50-bps cut and 125-bps rate cut by the end of the year
• New dot plot/Summary of Economic Projections (SEP): 2026 growth and inflation revised slightly higher, while unemployment rate revised slightly lower.

Data roundup:

• Initial jobless (US) claims fell from 264K (revised higher from 263K) to 231K Vs the forecast of 240K in the week ending September 13. It is to be noted that weekly jobless claims spiked from 236K to 263K, nearly four-year high, in the week ending September 6. It was suspected that Labor Day holidays in the US might have distorted the picture. This is why September 13 data was crucial. Continuing claims fell from 1,927K to 1,920K, much lower than the expected 1950K.
• Philadelphia Fed Business Outlook (September) surged from -0.3 to 23.2, much above the estimate of 1.70 and highest level since February.
• Leading Index in August fell from revised 0.1 per cent to -0.5 per cent, trailing the estimate of -0.2 per cent and lowest since May.
• On September 18, Bank of England, as expected, held rates at 4 per cent in a 7-2 MPC voting as the Committee warned that future rate cuts will be gradual and careful and will depend upon the extent to which underlying disinflationary pressures continue to ease. It is to be noted that the Bank sees inflation rising from current 3.8 per cent to 4 per cent next month as household inflation expectations hit a 2-year high in August. BOE staff raised their estimate of third-quarter GDP growth to 0.4 per cent from 0.3 per cent, estimating that the underlying pace is now around 0.25 per cent a quarter.

Silver ETF and COMEX Silver inventory:

• Total known global silver ETF holdings rose to 808.433 MOz on September 17, which is a fresh cycle high and highest level since July 2022. Holdings, up by 13.22 per cent YTD, jumped by nearly 6.34 MOz (197 tons)) in Sep. 16-17 period.
• COMEX silver inventory stands at 525.32 MOz as on September 17, slightly lower than all-time high level of 528 MOz seen on September 15.
• High silver prices hurting solar manufacturers:
• Rising share of silver cost in solar production costs, which has nearly tripled in the last two years, is squeezing solar manufacturers even as module production cost continues to fall.

Upcoming data and events:

• Today's US data on tap include TIC flows (July) and Chicago Fed Nat Activity Index.
• Major upcoming US data include S&P global US PMIs (Sep. 23), new home sales (Sep. 24), Q2 GDP tertiary (Sep. 25) and existing home sales (Sept. 25).
• China's PBoC will deliver its rate decision on 1-year and 5-year Loan Prime rates on September 22, though economists call for no change in these rates.
• Japan's national CPI will be out on September 19 and is likely to show moderating but elevated inflation.
• The Eurozone's PMIs will be out on September 23.
• Bank of Japan will announce its monetary policy on the same day. The Bank is expected to keep the key rate steady at 0.50 per cent despite high inflation.
• Swiss National Bank will deliver its monetary policy decision on September 25 wherein the Central Bank is expected to hold its key rate steady at 0 per cent.

Outlook:

• The US Federal Reserve signalling two more rate cuts by the year-end is a positive development for the metal as the Central Bank, in its June assessment, looked for merely 50-bps cut by the end of the year.
• Silver trading higher for the day despite spike in US yields and Dollar is again a supportive development.
• Healthy ETF inflows and upcoming rate cuts will eventually lead to higher silver prices, though short-term volatility is not ruled out.
• Buying the dips is the preferred strategy.
• Support is at $41 MCX December silver contract $40. Resistance is at $43. We look for a test of resistance around $44 in the coming months.
• MCX levels at USD-INR rate of ₹88.17.

(Disclaimer: Praveen Singh is the head - currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)