Silver remains vulnerable to US, China economic growth concerns

Silver price outlook by Sharekhan: Silver is expected to be volatile on contrasting factors like slowdown in China, US recession concerns, volatile yields and US rate cut speculations.

Spot silver surged sharply higher after falling to $26.45, a three-month low. The rally materialized on improving risk-on sentiments as risk assets stabilize on the Bank of Japan official's assurance on no more near-term rate hikes and the Fed officials’ outlook that one-month data is not enough to become overconcerned. 

The white metal was at 27.53, up nearly 3.45 per cent on the day. The MCX September silver contract at Rs 80,550 was up over 2 per cent.

US Dollar and yields

The US Bonds continue to fall after rallying sharply in July and in the start of August. The ten-year US yields at 4 per cent were up 1 per cent on the day. The US Dollar Index at 103.28 was up around 0.08 per cent as the Yen continues to weaken.  

Data roundup

The weekly US jobless claims in the week ending August 3 fell to 233K from 250K, the fastest pace in a year, though continuing claims in the week ending July 27 rose to 1875K from 1869K.

Upcoming data

China will release its July CPI and PPI on July 9. Subdued inflation reading will weigh on the metal. Next week is a data-packed week in which focus will be on US CPI (July), retail sales advance (July), Philadelphia Fed business outlook (August) and industrial production (July). Apart from the US data, investors will keenly monitor China's home prices, retail sales, industrial production and property investment (all July) data, too. The People's Bank of China will also decide its 1-year medium-term lending facility rate, which is likely to be maintained at 2.30 per cent

ETF and inventory

Total known global silver ETF holdings stood at 713.563 MOz as of August 7, which is lower than the last week's holdings of 718.195 MOz. Meanwhile, COMEX silver inventory continues to swell as it increased to 197.11 MOz, the highest level since May 21.

Gold/Silver ratio:

Gold/silver retreated by 1.50 per cent after hitting 89.99, the highest level since April 1.

Outlook

Silver continues to be vulnerable on concerns about the US and Chinese economies. In near-term, the metal is expected to be volatile on contrasting factors like slowdown in China, US recession concerns, volatile yields, green energy transition slowdown, and US rate cut speculations.

Silver needs to close above $29 to extend its recovery meaningfully. Until then it is likely be choppy. The white metal is expected to trade in a range of $26 (Rs 76,000) and $28.50 (Rs 83,500) in very short term.

Disclaimer: Praveen Singh is Associate Vice President of Fundamental Currencies and Commodities at Sharekhan by BNP Paribas. Views expressed are his own.