Limited downside seen in Silver, support placed at Rs 93,100: Sharekhan

Performance

Silver, after hitting 11-year high last week, has come under pressure this week as commodities traded with a bearish bias on rising bond yields and hawkish Fedspeak amid sticky inflation concerns.  

The US yields surged on a series of weak auction results, too.  The Fed's Kashkari had earlier warned this week that a rate hike is not entirely ruled out. Spot silver fell to $31.14 on May 30, the lowest level since May 27 before recovering slightly on weaker than expected US GDP price Index data (Q1) and pending home sales (April).  

On May 29, the ten-year US yields rose to 4.638 per cent, the highest since May 2. The metal was trading at $31.31, down 1.91 per cent on the day, when the MCX closed. The MCX July contract at Rs 94,110 was down by 2.13 per cent.

Data round up

US GDP price index came in at 3 per cent Vs the forecast of 3.10 per cent. Personal consumption at 2 per cent was short of 2.20 per cent forecast. US Q1 GDP was noted at 1.30 per cent annualised rate, which was in line with the forecast, but lower than the first estimate of 1.60 per cent. 

Inventory and ETF

COMEX silver inventory fell from 299.04 Moz to 298.46 MOz and remains at the highest level since January 2023. Total known global silver ETF holdings rose to 80.60 M Oz on May 29, but were lower than the last week's closing level of 80.686 Moz.

Chinese silver imports

It is expected that Chinese silver imports could jump in coming weeks on robust demand amid dwindling stocks as China's silver price holds above the global benchmark price. 

Chinese imports hit a three-year high in December of about 390 tons before falling back to rise again in April to over 340 tons; thus, remaining above the monthly five-year average of 310 tons. Chinese demand prospects are likely to limit the downside.  

Upcoming data

The US PCE deflator inflation data to be released on May 31 will be crucial for the metal. China will release its PMIs on May 31.

Outlook

Downside is expected to be somewhat limited ahead of Friday’s data. Traders are expected to buy the dips towards $30.50 (Rs 91,675) ahead of the US inflation data. Support is at $31 (Rs 93,100) /$30 (Rs 90,000). Resistance is at $ 32 (Rs 96,000) /$32.55 (Rs 97,800).

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Disclaimer: Praveen Singh is associate vice president of fundamental currencies and commodities at Sharekhan by BNP Paribas. Views expressed are his own.