Silver outlook positive; ₹122,000 acts as key support, ₹131,000 next target

Silver: Lower ahead of the US Job report

Performance:

 

Mirroring the performance of gold, silver surged to a fresh 14-year high of $41.47 on September 3 and retreated on Thursday on profit booking and a mild correction on a stronger US Dollar as US nonfarm payroll report (August) looms.

 

At the time of writing, spot silver was trading at $40.76, down around 1.1 per cent for the day, while the MCX December silver contract at ₹124,450 was down by 1.1 per cent, too.

 

Data roundup:

 

US data released on September 4 were largely mixed. ADP employment change (August) at 54K Vs the forecast of 68K was disappointing, while ISM Services Index recovered strongly from 50.10 in July to 52, fastest expansion since February as new orders surged the most since October 2024, though employment contracted for the third straight month.

 

Initial jobless claims rose to 237K, a two-month high and were higher than the median forecast of 230K as hiring plans fell to the weakest level for any August on record. 

Continuing claims edged lower by 4K to 1.94 million in the week ending August 23.

 

Q2 unit labour cost was revised lower from 1.2 per cent to 1 per cent in its final reading as nonfarm productivity rose the most since December 2023.

 

Bank of America noted that in a major shift from the decade's trend, the unemployment rate for recent college graduates in the US has now surpassed that of all workers due to macroeconomic headwinds, which include trade tensions and rapid pace of automation. US trade deficit in July surged 32.50 per cent to $78.30 billion in July, the widest deficit in four months.  ALSO READ | Gold likely to remain firm; near-term support at $3,500, other levels here

Trade and tariff:

 

The US Administration asked the US Supreme Court to take up the tariff case by September with arguments in early November so that the Court may deliver its ruling by the end of the year.

 

US Dollar Index and yields:

 

The US Dollar Index rose by 0.20 per cent to 98.33. Ten-year US yields fell by 0.87 per cent to 4.18 per cent on rate cut expectations ahead of the crucial US monthly job report, while 2-year yields fell 2 bps to 3.59 per cent, lowest since May 1. Thirty-year bonds at 4.87 per cent were down 2 bps.

 

Silver ETF holdings and COMEX inventory:

 

Total known global silver ETF holdings surged to a fresh cycle high of 806.91 MOz on September 3 and are up by 13 per cent YTD as investors pile into the metal on rate cut expectations. Holdings are at the highest level since June July 2022.Holdings in silver ETFs rose for a seventh straight month in August, the longest streak since 2020 leading to a decline in London stockpiles.

 

Registered COMEX silver inventory fell from the all-time level of 518.23 MOz to 516.06 MOz on September 3.  ALSO READ | Three reasons why Gold prices may hit ₹1.4-lakh mark sooner than you think

Saudi Central Bank's Strategic Silver Investments

 

It has been reported that the Saudi Central Bank has invested $40.4 million in silver-related exchange-traded funds of iShares Silver Trust and Global X Silver Miners ETF. Central banks shifting this focus to silver as a strategic asset is a huge boost to silver prospects more so as silver is a small market and can move quickly.

Upcoming data:

 

US nonfarm payroll report (August) will be released today. The report may give more clarity on the probable monetary policy trajectory of the Federal Reserve; thus, would be crucial for the financial markets.

 

Outlook:

 

Silver outlook continues to remain constructive on rate cut expectations, huge ETF inflows, elevated geopolitical and economic risks. Strength in gold bodes well for silver.

 

Today’s US job report will be quite crucial for financial markets. A Goldilocks report/ slightly disappointing report will be positive for the metal and any dips should be bought into. A strong report will lead to a short-term correction. The metal is likely to rise to $43 (₹131,000) in the coming months. Support is at $40 (₹122,000)/$39.50 (₹120,500)/$39.13 (₹119,500).

 

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