Silver eyes $85 in the short term; analyst suggests buying on dips

Silver: Recovery driven by retreating oil and Dollar

Performance

Weak looking silver prices recovered on April 9 as oil prices retreated.  At the time of writing, the white metal was trading with a gain of 3 per cent at $76.34. The metal is up by nearly 27 per cent since the cycle-low of $60.60 reached on March 23.

Geopolitics and oil

Risks to fragile ceasefire: The US and Iran prepared for peace talks in Islamabad at the weekend. Markets have been jittery over crucial issues such as control over the Strait of Hormuz and Israel’s offensive in Lebanon. However, markets found their footing after Israeli PM Netanyahu said Thursday that he has asked the Cabinet to open direct negotiations with Lebanon. Negotiations aim at disarming Hezbollah and establishing peaceful relations between the nations. Earlier, Israel reported that more than 200 Hezbollah militants were killed in strikes on Wednesday.

 

 

Brent oil prices, which were up by as much as 5 per cent for the day, gave back 80 per cent of the intra-day gains as Israel said that it will negotiate with Lebanon. 

 

Hormuz traffic remains low, more so as Iran has laid sea mines in the waterway. 

 

There is no report of strikes on Gulf countries since April 8. 

 

Iranian officials insist that Lebanon be included in the ceasefire negotiations.

US Dollar Index and yields

On April 9, the US Dollar Index slipped with oil and at the time of writing was hovering around 98.70 per cent, down by 0.5 per cent for the day on ceasefire optimism and weaker than the expected US data. 

 

2-year US yields at 3.74 per cent were down by 1 per cent, while ten-year yields softened by 0.6 per cent to 4.27 per cent. 

ETF and COMEX inventory

As of April 7, total known global silver ETF holdings stood at 798.45 MOz, a four-month low. Holdings are down 8.38 per cent from the cycle peak of 871MOz seen in December 2025. It is to be noted that investors have dumped 36 MOz since the Iran war began on February 28. ETFs have seen a net outflow of 65 MOz YTD. 

 

Registered COMEX inventory at 77.02 MOz are down by 61.7 per cent from the record peak of 201 MOz seen on September 2. 

Lease rate

One-month silver LBMA lease rate at 0.11 per cent is sharply down from 6+ per cent rate seen in February and is in line with historical averages. It does not reflect any immediate supply concerns.

Central bank watch

FOMC minutes: Minutes of the March 17-18 FOMC meeting struck a hawkish tone. The minutes showed that the Committee is inclined to keep rates on hold as the Iran war adds to already elevated inflation and employment risks. Minutes can be construed as mostly hawkish. 

 

The ECB's President Lagarde will speak at the Bretton Woods Spring Summit on April 15. 

Data roundup

US data released on April 9 were disappointing as real personal spending rose by 0.1 per cent m-o-m (forecast 0.2 per cent) in February, while January spending was revised lower from 0.1 per cent to 0 per cent. Q4 annualised GDP came in at 0.5 per cent in its final reading Vs the estimate of 0.5 per cent as personal consumption at 1.9 per cent trailed the estimate of 2 per cent. Initial jobless claims rose from 203K to 219K in the week ending April 4, though continuing claims fell from 1832K to 1794K. 

 

Fed's preferred gauge of inflation showed that the personal-consumption expenditures price index rose by 0.4 per cent in February, up from a 0.3 per cent increase in January, while the 12-month PCE inflation rate held steady at 2.8 per cent, and the core annual rate ticked down to 3 per cent, from 3.1 per cent. However, the data may not be of much importance in the sense that they predate the war in Iran, as the war is expected to have pushed inflation significantly in March.

Upcoming data

Major US data on tap in the near term include March CPI, University of Michigan sentiment and inflation expectations (April 10), March PPI (April 14), import price index (April 15), TIC flows, and industrial production (April 16). 

 

Traders will also monitor China's PPI, CPI (April 10), trade balance (April 14), 1Q GDP, retail sales, industrial production, and property data (April 16). Out of Eurozone, the focus will be on the March CPI (April 16). 

Outlook

Silver recovery is being driven by ceasefire optimism that is keeping the oil prices capped. Safe-haven flows seem to be largely absent. Further dip in oil prices amid material progress on the ceasefire front can push the metal to the $85 mark in the short term. However, for a sustainable rally, ETFs and safe-haven flows are needed. 

 

It needs to close above $78 for two days in a row to test the $85 resistance. Support is seen at $72/$69. 

 

Dip buying is advisable unless oil starts sharply surging once again on renewed Middle East tensions.

 

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