Here's how to trade Silver on September 3; check resistance, support here

Silver: Up as gold rises

 

Performance 

On September 2, spot silver traded between $40.14 and $40.91. At the time of writing this article, the metal was trading at $40.82, up around 0.20 per cent for the day, as it rose for the fourth consecutive day.

  The MCX December silver contract at Rs 124,605 was almost steady. Spot silver surged to a fresh 14-year high as it tagged along with gold that rose on safe haven demand.

 

Rally in gold 

Spot gold surged for the sixth straight day on September 2 as global bonds slumped on fiscal worries. 30-year UK yields surged to 5.718 per cent, highest since 1998.Long-term yields of German and Dutch bonds are at a 14-year high.  Japanese Yen tumbled over 1 per cent as it was reported that Hiroshi Moriyama, Secretary General of Japan’s Liberal Democratic Party, and a key ally of the PM Ishiba intends to resign. Resignation of Hiroshi, a fiscal hawk, may lead Japan to follow an expansionary fiscal policy at a time when the Bank of Japan needs to hike rates to address the issue of stubbornly high inflation.   

 

Data roundup 

US data released on Tuesday showed that S&P Global US manufacturing PMI (August) was revised lower from 53.30 to 53 in its final reading. ISM manufacturing (August) improved from 48 in July to 48.70 in August but trailed the median estimate of 49 as manufacturing contracted for the sixth consecutive month. ISM Prices paid cooled down from 64.80 to 63.70 (forecast 65) as new orders expanded unexpectedly. ISM Employment came in at 43.80 Vs the forecast of 45; thus, contracted at a rate faster than expected. Construction spending was down 0.1 per cent in July as it contracted for the third straight month.

Eurozone's core CPI, matching the forecast, rose 2.3 per cent Y-o-Y, while headline CPI accelerated 2.1 per cent Y-o-Y, faster than the July reading of 2 per cent.

 

Silver ETFs and COMEX Inventory 

As of September 1, total known global silver holdings stood at 805.20 MOz, highest since July,2022. Silver ETFs have recorded inflows for four consecutive weeks and are up 2,830 tons or 12.74 per cent YTD. ETF inflows have risen by over 1,100 tons since mid-July.

Registered COMEX silver inventory stood at record high level of 518.32 MOz as of August 29.

 

Silver a critical mineral 

The US Geological Survey included silver on a draft list of critical minerals list last week, which is also fuelling the rally, though such inclusion will not do much to boost the US silver purchases.

 

CFTC positioning 

As per weekly CFTC data on futures and options, money managers increased their bullish silver bets by 5,418 net-long positions to 34,205, the most bullish position in four weeks. The short-only total fell to the lowest in four weeks

 

Gold-silver ratio:

Gold-silver ratio after falling to a nine-month low of 85.22 on September 22, was hovering around 86.14. The ratio has a strong support at 85, while the near-term resistance comes in around 88.50.

 

Outlook

  Strong ongoing rally in Chinese equities is mostly positive for the grey metal. CSI33 Index has rallied over 27 per cent from its April low.

  The metal is also supported by huge ETF inflows as investors have piled into the metal on rising rate cut expectations in the wake of the Fed Chair Powell’s Jackson Hole speech on August 22.

  Silver is expected to rise to $43 level (₹131,000) in the coming months on a multitude of supportive factors including rising fiscal worries, heightened geopolitical tensions, huge ETF inflows and rate cut expectations. At the same time, we note that rising yields are more positive for gold than silver. Nonetheless, silver is likely to trade with a bullish bias. Dip buying remains the favoured strategy. Support is at $40 (₹122,000)/$39.50 (₹120,500)/$39.13 (₹119,400).

  MCX Levels at USDINR rate of Rs 88. 

 

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