Geopolitical, economic risks set stage for further gains in silver

With multiple factors, viz geopolitical and economic risks supporting silver, the white metal may extend its gains

Silver: Rises to $33 as US Dollar weakens amid economic and geopolitical worries

Silver performance:

On May 20, spot silver rallied on surging gold prices, rate cuts and economic and geopolitical worries. Weakness in the US Dollar also helped the metal.

 

The white metal rose to $33, the highest since May 13.

 

The metal, at the time of writing this article, was trading at $33, up around 2 per cent on the day. The MCX July contract at ₹97,280, was up around 2 per cent, too.     

Event roundup:

As expected, on May 20, China's Central Bank slashed one-year and five-year Loan Prime rates by 0.1 per cent each to 3 per cent and 3.50 per cent respectively.

 

 

PBoC was joined by the Reserve Bank of Australia, that cut rates by 25 bps to 3.85 per cent, two-year low. 

Geopolitical watch:

Iran, in its response to US President Trump's special envoy's demand that the Islamic republic cease its production of the fissile material, said that its uranium enrichment ability is 'non-negotiable’ and is a 'vital technology for' for its nuclear industry. Iran and US, engaged in indirect negotiations, are likely to hold their next round of talk this week in Europe.

 

Israel's PM Netanyahu said that Israel will take over the entire Gaza Strip and the military will carry out an unprecedented attack on Hamas.

 

Trump's two-hour talks with Putin on the Ukraine-Russia ceasefire did not yield much. Trump did not mention any demand for a timeline. European leaders are concerned that Trump is retreating from his position of demanding a ceasefire. Israel's decision to step up its operations has made many Arab and European nations concerned over the possibility of huge death tolls in Gaza. 

Complacency in markets:

JP Morgan’s chief, Jamie Dimon, in a speech on Monday, warned that given heightened geopolitical stagflation and geopolitical risks, there is an extraordinary amount of complacency in the marketplace.

 

Japan warns of a fiscal crisis ‘worse than Greece’ as its borrowing costs surge.

 

On May 19, Japan’s PM Ishiba, a fiscal hawk, warned the members of Parliament, that any tax cuts can’t be paid for by more borrowings as the nation is facing a fiscal crisis worse than Greece with its borrowing costs hitting a 20-year high. Japan’s debt to GDP ratio is more than 250 per cent.

US Dollar Index and yields:

At the time of writing, notwithstanding higher yields, the US Dollar Index was trading at 10.111, down nearly 0.30 per cent on the day. Ten-year US yields, after backing off from 4.56 per cent, high post-Moody's downgrading of the US credit, were hovering around 4.48 per cent, up around 0.6 per cent on the day. Similarly, 5-year yields that had earlier jumped past the April high of 5.0186 per cent to 5.035 per cent, the highest since November 2023, were seen at 4.96 per cent, up by nearly 1 per cent on the day. 

CFTC positions:

Hedge fund managers cut their net-long positions by 1,788 net-long positions to 28,460 last week, a three-week low. However, despite the recent outflows, gold ETF holdings are still up around 6 per cent this year.

Global silver ETF holdings:

Total known silver ETF holdings stood at 733.02 MOz as of May 19 and are up over 2 per cent YTD and down around 0.5 per cent from the cycle peak of 737.127 MOz reached on May 1.

COMEX Silver Inventory:

COMEX silver inventory was noted to be 501.49 MOz as of May 19, down roughly 0.5 per cent from the all-time level of 504.719MOz as seen on May 12.

China's silver imports:

China imported 273.732 tons of silver in April 2025, the highest since February.

Upcoming data:

Traders will closely monitor S&P Global US manufacturing and services PMI data to be released on May 22.

 

Silver outlook:

As multiple factors, viz geopolitical and economic risks, along with a weaker US Dollar, support silver, the white metal may extend its advance to $34 (MCX Silver July ₹100,000) level if it takes out $33.11 (₹97,600) resistance convincingly. Interim resistance is at $33.53 (₹98,800). Support is at $32 (₹94,300). However, silver will be mostly at a risk should gold rally falter.  

(Disclaimer: Praveen Singh is associate vice president of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)