Silver to trade within range of $31 to $32.25: Mirae Asset Sharekhan

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Silver: Slightly down ahead of the US CPI data

 

Performance:

Spot silver traded with a bearish tilt throughout the day on February 12. The metal peaked at $32.25 in the Asian session and slumped to $31.25 in the US session before recovering sharply in the wake of the Fed Chair Powell’s speech.

 

It was trading at $31.94, down nearly 0.50 per cent on the day, at the time of writing this report as the MCX silver contract was noted at Rs 94,571, down 0.76 per cent on the day.

 

The Federal Chair Powell’s testimony:

Federal Reserve Chair Powell, in his testimony to the Senate Banking Committee on February 11, said that the Bank is in no rush to cut rates as the US economy remains strong and the job market is broadly balanced with no significant wage related inflationary pressure as concerns about the labour market have diminished significantly since mid-2024.  He added that the policy is significantly less than it had been earlier and the neutral interest rate has moved up significantly since the low pandemic level. He mainly reiterated what he said at the last FOMC meeting concluded in January.  Also Read: Praveen Singh of Mirae Asset Sharekhan suggests 'buy on dips' for gold

 

Upcoming data:

Today, the crucial US consumer price index (CPI) report (January) will be released. CPI year-on-year (Y-o-Y) is expected to rise by 2.9 per cent, same as in December, whereas core CPI Y-o-Y is likely to rise by 3.1 per cent, slightly down from the 3.2 per cent increase noted in December.

 

Upcoming event:

The Fed Chair Powell will testify to House Financial Services.

 

US Dollar and yields:

The ten-year US yields at 4.54 per cent were up by nearly 1 per cent and marked day's low at 4.50 per cent. The two-year US yields at 4.29 per cent were up by 2 bps. The US Dollar Index at 108.04 was down by around 0.25 per cent.

 

Tariff developments:

The US President Trump has set a 25 per cent tariff on steel and aluminium imports, valued at $50 billion in 2024, which will affect imports from Canada and Mexico as well. The new rates will take effect on March 12. The European Commission President Ursula von der Leyen said that the EU will take firm and proportionate counter measures. Trump said that reciprocal tariffs could be announced in two days.  Also Read: Gold climbs Rs 10, silver dips Rs 100; yellow metal trading at Rs 87,390

 

Silver held in London Vaults:

As at end January 2025, the amount of silver held in London vaults stood at 23,528 tonnes which is an 8.6 per cent decrease from December.

 

USDINR falls sharply:

The USDINR has fallen around 1.5 per cent in the last two sessions on a strong intervention by the Reserve Bank of India (RBI) to smoothen the moves in the domestic currency. This sharp appreciation in the INR has weighed down on the MCX commodities. Traders need to be mindful of the sharp swings in the domestic currency.

 

Outlook:

Spot silver, despite correcting lower from its cycle high of $32.65, is still up over 10 per cent this year. The US Fed is unlikely to change its hawkish stance anytime soon, though, markets still think that the Fed will follow the other central banks in cutting rates soon. Silver has not been able to capitalise on gold’s strength as normally silver rises faster than gold during strong rallies. Economic concerns arising on the weak Chinese economy and trade wars are acting as headwinds for the metal.  It is likely to trade largely in the range of $31 (Rs 91,500) to $32.25 (Rs 95,500) in the near-term. It needs to close above $32.65 (Rs 96,700) for two days in a row to extend its rally in a significant way. Soft US CPI data will be helpful for bulls.