Silver: Recovers but remains vulnerable
Silver Performance:
On January 14, spot silver traded between $29.52 and $29.97 as the metal recovered, taking support around Monday's low of $29.50. The recovery was aided by somewhat softer-than-expected US PPI data and a possibility of gradual US tariffs.
The metal was at $29.84, up around 0.75 per cent on the day at the time of writing this report. The MCX March silver contract at Rs 90,695, up around 0.20 per cent.
Data roundup:
The US wholesale inflation, surprisingly, eased in December on lower food costs and flat services. The PPI final demand was up 0.2 per cent M-o-M (forecast 0.4 per cent) after rising 0.4 per cent in November. The overall PPI was up 3.3 per cent Y-o-Y (prior 3 per cent) as core PPI rose 3.5 per cent Y-o-Y (prior 3.5 per cent) -- both the readings were at their highest since February 2023. The readings, however, trailed their respective forecasts of 3.5 per cent and 3.8 per cent.
Food prices declined 0.1 per cent as overall goods prices rose 0.6 per cent following a rise of 0.7 per cent in November. Core goods prices were steady.
Chinese economic woes - China's new loans posted the first decline since 2011 last year on weak demand as financial institutions offered 18.09 trillion yuan ($2.47 trillion) of new loans in 2024 as compared with a median forecast of 17.87 trillion Yuan. New Yuan loan volume stood at 22.75 trillion Yuan in 2023.
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ETF and COMEX inventory:
Total known global silver ETF holdings stood at 713.987 Moz as on January 13 as the holdings rose for the second straight day; however, ETFs have seen a net outflow this year so far. COMEX Silver inventory rose to 324.535 MOz on January 13, which is a fresh cycle high.
Trump's tariff plans: Gradual approach possibility
It has been reported that members of President-elect Donald Trump's incoming economic team are looking at gradually hiking tariffs month by month as this approach would give them leverage in negotiations and would contain a spike in inflation. As per this plan, which is still in early stages, tariffs may be increased in the tune of 2 per cent to 5 per cent a month.
Kitco news top metal 2025 survey:
As per the survey, 51 per cent of the respondents see gold as the top performer this year. Around 36 per cent see silver emerging as the winner, while nearly 8 per cent favour copper, and the 5 per cent remaining see platinum or palladium as the best performer.
US Dollar Index and yields:
Notwithstanding softer-than-expected US PPI data, the ten-year US yields rose to 4.804 per cent and were seen at 4.79 per cent at the time of writing this report as bond traders are cautious ahead of the US CPI report.
The US Dollar Index at 109.39 was down around 0.6 per cent on the day on gradual tariff possibility and the PPI data.
Silver Outlook:
Although the US PPI data and a possibility of gradual tariff hikes are positive for the metal, the US CPI data will be crucial. The delayed reaction to the US nonfarm payroll report reflects markets' concerns about the US rates. In addition, China's economic woes are negative for the metal.
The metal may recover should the US CPI data turn out to be subdued, though upside is likely to be capped unless we get more clarity on the US tariffs.
Support is at $29.40 (Rs 89,400)/$29 (Rs 88,200). Resistance is at $30 (Rs 61,200)/ $30.50 (Rs 92,700).
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Disclaimer: This article is by Praveen Singh, associate VP, fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.