Silver may retest $64 support; break could trigger fall to $59-$60: Analyst

Performance:

• Silver, like gold, remains under acute downside pressure as hardening yields and fading rate-cut expectations reflect central banks’ heightened vigilance against the spectre of inflation.
• On Thursday, the white metal tumbled to $65.52 --lowest since February 6.
• At the time of writing this article, the metal was trading at $70.18, down over 6 per cent for the day.

Energy turmoil:

• The price of oil and natural gas jumped due to escalating attacks in the Persian Gulf causing long-term damage to major energy facilities. An Iranian missile strike on the Ras Laffan complex -- the world’s largest liquefied natural gas plant-- in Qatar on March 18 caused extensive damage. Reuters quoted Qatar Energy Chief Executive Officer Saad al-Kaabi, who said two facilities that produce 17 per cent of the country’s liquefied natural gas (LNG) exports, or about 13 million tons a year, were affected, and it will take three to five years to repair them.
• Oil loadings on Saudi Arabia’s west coast were briefly affected by an attack. Similarly, a gas facility in Abu Dhabi was shut following damage due to the ongoing war.
• Iran has threatened that some Gulf energy sites are now direct and legitimate targets.

Central bank watch:

• As expected, the US Federal Reserve, in its monetary policy decision taken on March 18, kept the benchmark rate unchanged at 3.50-3.75 per cent. The bank revised inflation, growth, and neutral rate forecasts higher as artificial intelligence (AI)-led productivity is expected to support economic growth. As per the Federal Open Market Committee (FOMC), the impacts of the Iran war on the US economy are uncertain. In his post-FOMC presser, the Fed Chair Powell said that the US growth is solid and there will be no rate cut unless inflation comes down. He added that some FOMC members talked about the next move possibly being a hike though the vast majority of participants don’t see that as their base case.
• As anticipated, the European Central Bank (ECB) kept the benchmark interest rate unchanged at 2 per cent for a sixth straight meeting. The central bank said that its severe scenario projection sees inflation peaking above 6 per cent in Q1 2027. President Lagarde said in her presser that inflation risks are skewed to the upside.
• The Bank of England, in line with the expectations, kept the benchmark rate unchanged at 3.75 per cent in a 9-0 vote, the first unanimous decision without any dissent in four and a half years. The central bank said that it stands ready to act against a rise in inflation triggered by war in West Asia. The two-year gilt yields jumped by 27 basis points (bps) as bonds tumbled on the Bank's hawkish tilt. Traders are pricing in nearly 3 rate hikes by the end of the year.
• * The Bank of Japan left its key rate unchanged at 0.75 per cent. The BoJ's Governor Ueda suggested that the Bank was prepared for a rate hike in April if required.
• Reserve Bank of Australia hiked rates by 25 bps for the second straight time on March 17.

Data roundup:

• Thursday’s US data showed that the weekly US job data were mixed. Net TIC flows stood at $25 billion in February. Philadelphia Fed Business Outlook improved from 16.1 to 18.3 (forecast 8) in March. Leading Index at -0.1 per cent in January matched the estimate, while new home sales at 5,87,000 lagged the estimate of 7,22,000.
• US PPI data for February, released on March 18, were hotter than expected as companies are passing some of the cost pressure on to consumers, especially in services: producer price index (PPI) final demand rose 0.7 per cent month-on-month (M-o-M) (forecast 0.3 per cent, prior 0.5 per cent), whereas PPI was up 3.4 per cent year-on-year (Y-o-Y) (forecast 3.4 per cent, prior 2.9 per cent). Core PPI was up by 0.5 per cent M-o-M (forecast 0.3 per cent, prior 0.8 per cent), while it was up by 3.9 per cent Y-o-Y (forecast 3.7 per cent, prior 3.5 per cent).

ETF and COMEX inventory:

• Total known global silver exchange traded fund (ETF) holdings stand at 805.78 MOz, down nearly 6 per cent year-to-date (Y-T-D) and down by 3.5 per cent since the Iran war broke out.
• Registered COMEX silver inventory at 78.90 MOz is at the lowest level since September 2024 and is down by around 10 MOz since the beginning of the Iran war.

READ | Gold, silver ETFs fall up to 6% on Fed meet outcome, West Asia tensions 

Silver lease rate:

One-month silver lease rate at 0.69 per cent is now in line with the historical average of 0.3-0.6 per cent and does not show any immediate supply concerns.

 

Dollar index and yields:

• The US Dollar Index, which has been gaining on the US energy's independence, retreated after hawkish outcomes of the monetary policy meetings of the BoE, BoJ, and ECB.
• At the time of writing, the Index was hovering around 99.79, down 0.3 er cent for the day. Two-year US yields surged by over 2 per cent to 3.86 per cent--highest since August 1, 2025. Ten-year yields at 4.27 per cent were up by 1 per cent.

Upcoming data:

• Major upcoming US data include ADP weekly employment change (March 7), nonfarm productivity (Q4 final), unit labour costs (Q4 final), S&P global US manufacturing and services purchasing managers' index (PMIs) (March 24), import and export price indices (March 25), and University of Michigan Sentiment and inflation expectations (March 27).
• Out of Europe, focus will be on the Eurozone's and the UK's PMIs (March 24) and UK inflation (March 25).

Outlook:

• Diminishing rate cut odds and strength in the US Dollar are trumping the safe haven demand for the metal coming on the Iran war.
• Continuing energy turmoil in West Asia has alerted the Central Banks regarding the possible inflationary impact.
• Rate hike possibility will rise or remain high even though rising energy prices are due to supply shock, not demand shock.
• Fuel and fertiliser shortage expected to increase food inflation if the war does not end soon. In that case, rate hikes will be highly probable.
• Falling ETF holdings even during war spell do not bode well for the metal.
• Support at $64 is expected to be tested once again, a breach of which could open way to $59-$60 support band. Resistance is at $75/$78. 

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