Here's how to trade Silver on January 23; check support, target and more

Performance

Spot silver has been highly volatile of late. On January 21, the white metal fell to $90.86 (from around $94) in the wake of Trump’s speech at the WEF, Davos; however, the metal recovered quickly on dip buying, albeit amid volatility.

 

At the time of writing this article, the metal was trading at $96.45, up around 3.5 per cent for the day. It surged to $96.59, a fresh record high.

 

It was up over 12 per cent in the week ending January 16 and is up around 7 per cent so far this week.

Uncertainty over Greenland lingers

US President Trump said that he had agreed with NATO Secretary General Mark Rutte on a framework for a future deal on Greenland; however, little is known about the deal.

 

 

It is said that Trump and Rutte had agreed on a two-track approach on Arctic security, which includes negotiations between the US and Denmark on their existing defence treaty and NATO talks on expanding its role in Arctic security.

 

Greenland’s Prime Minister said that they will choose Denmark and were not aware of the concrete content of the deal. He added that while they are willing to have a NATO mission in Greenland, their sovereignty is not negotiable.

 

European officials said that the matter is not settled and that they remain on guard as they expect thorny negotiations ahead.  ALSO READ | Silver, gold ETFs rebound sharply after Thursday's crash; here's why

US Dollar Index and yields

The US Dollar Index fell in the wake of the ‘Sell America’ trade in light of the Greenland issue and surging yields. The index rebounded on January 21 as Trump walked back on Greenland; however, it resumed its slide on January 22. At the time of writing this article, the index was hovering around 98.35, down nearly 0.4 per cent for the day and 1 per cent for the week.

 

After a brief respite on January 21, two-year bonds fell again on Thursday and were quoting at 3.61 per cent, the highest since November 5. Ten-year yields at 4.24 per cent were largely flat, though earlier yields shot up to 4.31 per cent, the highest since August 26.

ETF

Total known global silver ETF holdings stood at 848 MOz as of January 21. Holdings are up 1.7 per cent YTD on a net inflow of 450 tons this year.

Silver lease rate

The one-month LBMA silver lease rate stood at 3.14 per cent, sharply down from around 8 per cent seen a few days back, but still above the historical average of 0.3 per cent–0.5 per cent.

Huge volatility in domestic gold and silver prices

Both gold and silver continue to exhibit huge volatility and choppiness in the run-up to the budget to be unveiled on February 1, as investors discount and adjust to the possibility of a hike in import duties on precious metals. The notion of a tight market may also have been instrumental in pushing the domestic premium higher.

Upcoming data and events 

Major upcoming US data include S&P Global US PMIs (January 23), University of Michigan sentiment and inflation expectations (January 23), ADP weekly employment change (January 27), Conference Board Consumer Confidence (January 27), and non-farm productivity and unit labour costs (January 29).

 

Japan's national CPI will be released on January 23. CPI is expected to dip to 2.2 per cent in December from 2.9 per cent in January. Nonetheless, it is worth noting that the CPI reading has been above the Bank's target of 2 per cent since July 2021.

 

The Eurozone and UK PMIs will be released on January 23.

 

Major focus will be on the Fed's monetary policy decision due on January 28, wherein the central bank is expected to keep the benchmark overnight Fed funds rate unchanged. As the December payroll report was somewhat encouraging, with US employers adding 50K jobs for the second straight month following a steep loss of 173K jobs in October, and the unemployment rate edging lower from 4.5 per cent to 4.4 per cent, the Fed may lean somewhat hawkish in its monetary policy decision. However, as the drop in the unemployment rate could be due to contraction in the job pool, the job market remains weak.

 

The Bank of Japan will announce its monetary policy decision on January 23. The central bank risks its credibility as it has not been able to rein in inflation for years altogether.

Outlook

Spot silver is expected to test psychological resistance at $100 amid lingering geopolitical uncertainty and worries. Risk will come from easing geopolitical concerns. Support is at $95/$90. Domestic prices may be influenced by rising and falling expectations of an import duty hike.

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(Disclaimer: Praveen Singh,  head currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)