Silver price falls on US job data and China stimulus; Should you buy dips?

Spot silver at the time of the MCX closing was trading at $31.04, up nearly 1.60 per cent on the day. The MCX December silver contract at Rs 90,283 (LTP) was up 1.59 per cent.

Silver surged on disappointing US weekly jobless claims data, though hotter-than-expected US CPI inflation data led to a volatile session. Silver rally was aided by China’s stimulus hopes also as Chinese authorities are set to announce details of fiscal stimulus on Saturday.

Data round-up:

US CPI m-o-m came in at 0.2 per cent (forecast 0.1 per cent), CPI y-o-y was noted at 2.4 per cent (forecast 2.30 per cent), core CPI rose by 3.3 per cent, fastest pace since June, and topped the estimate of 3.2 per cent, whereas core CPI m-o-m came in at 0.30 per cent (forecast 0.20 per cent).

Initial claims increased by 33K to 258K in the week ended October 5, the highest since August 2023. Even continuing claims were higher than forecast rising to 1.86 million (forecast 1.83 million). The weekly job data were disappointing; however, to some extent, readings might have been impacted by disruptions due to hurricanes Helene and Milton.

US Dollar Index and yields:

The US Dollar Index extended its rally to the ninth straight day as it rose 0.07 per cent to 103, up around 3 per cent from the cycle low.

The ten-year US yields at 4.10 per cent were up by 3-bps, whereas the 2-year yields slid by 0.6 per cent to 3.99 per cent. The 2-year yields are vulnerable and are likely to move back above 4 per cent mark.

Geopolitical watch:

Israel’s security cabinet was set to convene on Thursday evening to discuss Israel’s much-anticipated response to an Iranian missile attack. Meanwhile, Israel continues with its operations in Lebanon and has reportedly struck central Beirut. 

Upcoming data:

Today's US data include PPI (September) and University of Michigan sentiments (October preliminary) and University of Michigan inflation expectations.

ETF and inventory:

Total known silver ETF holdings stood at 793.378 Moz, sharply up from 724.57 Moz seem at the end of the last week. COMEX silver inventory was noted to be 306.933 Moz, highest since August 29.

Outlook:

While geopolitical situation remains supportive for the metal, China’s stimulus details will also be crucial for the metal. Surging US Dollar Index and tumbling bond prices are acting as headwinds for the metal as the US rate cut pace has become somewhat uncertain in the short term. Dip buying is preferred. Support is at $30 (Rs 87,500)/$29.60 (Rs 86,000) whereas resistance is at $31.50 (Rs 91,500) /$32 (Rs 93,000).