How to trade Silver ahead of Budget 2025? Check support, resistance levels

Silver rate today: Given the fact that industrial commodities are struggling, and tariff threats loom large, silver may struggle to extend its rally much further on a sustained basis

Silver: Up for the third straight day as the US Dollar and yields ease

Silver Performance:

 

Spot silver prices surged for the third day on January 30. Spot silver was up around 2.35 per cent yesterday. The MCX March silver contract, at Rs 93,440, was up around 1.71 per cent.

 

During the day, the white metal traded between $30.80 and $31.73.

 

Silver gained on a weaker US Dollar and softer US yields as the risk appetite remained strong post FOMC outcome. US yields and Dollar were unable to gain despite a hawkish rate hold by the FOMC. 

 

 Event roundup:

 

The US FOMC's policy decision was in-line with the expectations as the US central Bank kept the Fed Fund rate unchanged at 4.25-4.50 per cent. The Fed conveyed that it is not in a hurry to cut rates as unemployment rate is stabilising at low levels, economic growth pace is solid, and inflation remains inflated. 

 

It removed the sentence 'inflation is progressing towards its goal of 2 per cent'. The Fed Chair later clarified that it was basically a language clean-up, which weighed on the US Dollar Index. As such, the Central Bank did not offer any convincing clues on its monetary policy going forward. In essence, the Fed would need more data to move its needle on the rates.

 

As widely expected, South Africa Central Bank and the European Central Bank cut rates by 25 bps each. The ECB cut the deposit facility rate by to 2.75 per cent as the Bank slashed rate for the fifth time in this rate cutting cycle. ECB President Lagarde said that the rates were still restrictive, so further rate cuts are possible. She added that conditions for recovery remain in place. 

Data roundup:

 

US GDP Q4 Advance reading showed that the economy grew at an annualised pace of 2.3 per cent versus the forecast of 2.6 per cent and was slower than the prior quarter pace of 3.1 per cent. Personal consumption at 4.2 per cent topped the forecast of 3.2 per cent. Weekly job data were better-than-expected.

 

The Eurozone data, however, was disappointing as Germany's economy contracted 0.2 per cent Q-o-Q, more than the expected contraction rate of 0.1 per cent, while the Eurozone's economy grew at an annualised pace of 0.9 per cent, slower than 1 per cent as expected. Italy's unemployment rate jumped to 6.2 per cent in December from 5.9 per cent in the prior month and was higher than the forecast of 5.7 per cent.

 

US Dollar Index and yields:

 

The US Dollar Index at 107.92, was down around 0.07 per cent yesterday. The ten-year US yields, at 4.52 per cent, were down around 0.60 per cent as the yields fell below the psychological level of 4.5 per cent. The 30-year yields fell nearly 0.46 per cent to 3.76 per cent.

 

Upcoming data:

 

Today's US data include real personal spending and PCE deflator inflation data (December). Germany's retail sales (December) will also be on traders’ radar.

 

Upcoming event:

 

India’s budget to be presented on February 1 will be important for domestic gold prices as import duty on precious metals may be increased. 

 

ETF holdings and COMEX Silver inventory:

 

Total known global silver ETF holdings fell to 707.949Moz on January 29, the lowest since July 22. The holdings are down by nearly 7MOz this year. COMEX silver inventory surged to a fresh cycle high of 352.313 MOz, the highest level since February 2022. 

Silver Institute: Silver market to remain in a sizeable deficit in 2025

 

As per the Silver Institute, the silver market balance is expected to remain in a deficit for the fifth consecutive year as the Institute sees a record industrial demand continuing. The expected supply of 1.05 billion ounces will be well short of the expected demand which is likely to be around 1.20 billion ounces.

 

Outlook:

 

Given the fact that industrial commodities are struggling, and tariff threats loom large, Silver may struggle to extend its rally much further on a sustained basis. The ETF flows are negative. However, the metal may benefit on gold's performance and ride on its coattails to challenge crucial resistance in the $32.35 (Rs 95,700)-$32.55 (Rs 96,300) zone. Interim resistance is at $31.80 (Rs 94,000). Support is at $31 (Rs 91,700)/$30.50 (Rs 90,200).    =========================  Disclaimer: Praveen Singh is Associate VP of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.