Silver consolidating after steep decline; here's what Sharekhan suggest

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Silver: Consolidating after a steep decline

 

Performance:

Spot silver slumped over 3 per cent on Monday as numerous negative factors weighed on the metal.

 

President-elect Trump's appointing of Scott Bessent, a deficit hawk, alleviated some of the deficit concerns. At the same time, the possibility of Israel and Hezbollah reaching a ceasefire deal shortly and no major disconcerting developments in the ongoing Russia-Ukraine war took out some of the risk premium embedded in the prices.  Rallying risk assets also dented the sentiments about the precious metals.

 

The metal consolidated its losses on Tuesday and was trading nearly 0.18 per cent up at $30.36 at the time of writing this report. The MCX March contract was at Rs 90,404, up around 0.46 per cent.

 

Data and event roundup:

In a major development on Tuesday, which weighed on industrial commodities, President-elect Donald Trump said that he would impose 25 per cent tariffs on goods imported from Canada and Mexico and additional 10 per cent tariffs on Chinese goods.

 

The US data released on Tuesday were largely disappointing as Philadelphia Fed non-manufacturing activity (November) slid to -5.90 from 6 in October, new home sales (October) came in at 6,10,000 (forecast 7,25,000, prior 7,38,000) and Conference Board Consumer Confidence (November) was registered at 111.70 (forecast 111.80). S&P CoreLogic CS 20-City (September) was noted at 0.18 per cent (forecast 0.30 per cent).

 

The US dollar index and the yields:

The US dollar index, which slid on Monday following the incoming Trump administration appointing Scott Bessent, a deficit hawk, regained some of the lost ground Tuesday on tariff threats.

 

The US dollar index was up nearly 0.25 per cent at 107.08 at the time of writing this report. The ten-year yields were 1.08 per cent higher to 4.308 per cent-- the low end of the recent range, whereas the two-year yields at 4.289 per cent were up by 0.87 per cent.

 

Upcoming data:

As the US markets will have a shortened trading week, we have a data deluge scheduled for November 27. Traders will closely watch secondary 3Q US GDP, durable gold orders (October Preliminary), initial jobless claims, personal income and spending (October), and personal consumption expenditure (PCE) price Index, the Fed's preferred gauge on inflation. 

 

ETF:

Total known global silver ETF holdings stood at 735.257 MOz on November 25, the lowest level since November 15, as holdings fell for the third straight day.

 

Outlook:

The US administration threatening additional tariffs on major economies is a negative development for the metal. Industrial commodities were largely lower on Tuesday. At the same time, elevated geopolitical risks are likely to cushion the decline to some extent. 

 

The metal may test the support at a cycle low of $29.67 (Rs 88,200). The next major support is at $29 (Rs 86,300). Resistance is at $31 (Rs 92,200)/$31.80 (Rs 94,500).

 

(This article is by Praveen Singh, associate VP, fundamental currencies and commodities at Sharekhan by BNP Paribas. Views expressed are this own.)