Silver price outlook: Analyst suggest buying on dips; key levels to watch

Silver price outlook: On June 10, the white metal closed with a loss of 0.40 per cent at $36.59 as investors waited for US-China trade talk outcome

Spot silver traded between $36.30 and $36.84 on June 10 and closed with a loss of 0.40 per cent at $36.59 as investors waited for US-China trade talk outcome. The white metal is trading steady at the time of writing this article.

US-China trade talks concluded:

US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer met a Chinese delegation led by Vice Premier He Lifeng at London's Lancaster House.

 

US negotiators announced early Wednesday that the United States and China agreed to a preliminary deal on how to implement the consensus the two sides reached in Geneva, which involved lower tariff rates on each other. The US delegation absolutely expects that issues around shipments of rare earth minerals and magnets will be resolved with the framework implementation.

 

 

Lutnick called the agreement "a handshake for a framework” to "start to implement that framework" as long as both Trump, and Chinese President Xi approve.

US appeals court allows Trump tariffs to stay for now:

The US Court of Appeals for the Federal Circuit has allowed Trump’s tariffs to remain in effect while legal appeals continue.

UK mandates solar panels for new homes:

In a positive development for silver demand, UK government Energy Secretary Miliband confirmed on June 6 that the forthcoming Future Homes Standard will make installing solar panels on new homes “almost universal” in England, barring rare exceptions where a PV installation would make no difference to energy efficiency. He called this step to be a ‘rooftop revolution’.

 

This mandate is not a binding on Scotland, Wales and Northern Ireland as these regions set their regulations locally.  ALSO READ | Silver prices surge: Top reasons and what to expect in the months ahead

Riots in Los Angeles:

The Trump Administration has deployed 700 Marines who will join the roughly 2,000 California National Guard troops stationed in Los Angeles over the weekend, US Northern Command announced Monday.

 

Riots in Los Angeles erupted on June 6 after Immigration and Customs Enforcement (ICE) raids in the city and the situation remains tense. As a political fallout of the riots, California’s Governor Gavin Newsom may be arrested. Newsom said on Monday that he might take legal action over the planned use of Marines as he called their deployment “illegal” and “a blatant abuse of power".

 

It has been reported that many other cities like Boston, Houston and Philadelphia joined Los Angeles in protests on Monday. 

Data roundup:

UK's monthly job report (April), released on Tuesday, was somewhat weaker than expected as average weekly earnings 3M Y-o-Y came in at 5.3 per cent compared to the estimate of 5.5 per cent, while weekly earnings ex-bonus 3M/Y-o-Y at 5.2 per cent fell short of the forecast of 5.3 per cent. Employment change 3M/3M at 89K was better than the forecast of 40K. Claimant count rate edged higher from 4.4 per cent in April to 4.5 per cent in May. Jobless claims in May rose by 33.10K.

 

US NFIB small business optimism (May) 98.80 topped the estimate of 96.

 

US treasury auction:

US 3-year treasury bond sale worth $58 billion went smooth on Tuesday, which led to lower yields. Focus will be on Thursday’s 30-year bond auction, which is expected to be more challenging given the weakening demand for long-term bonds globally.   ALSO READ | Gold outlook: Dips to remain supported as US-China trade talks underwhelms

US Dollar Index and yields:

At the time of writing, the US Dollar Index, is trading with a gain of 0.11 per cent at 99.15. US 10-year and 30-year yields are a tad lower at 4.46 per cent and 4.92 per cent respectively. 

Silver ETF:

Total known global silver ETF holdings stood at 753.21 MOz as of June 9, which is the highest level since May 2023. Silver ETF holdings are up over 5 per cent YTD as holdings rose for the fourth straight week in the week ending June 6.

 

China's silver imports:

China imported 273.732 tons of silver in April, a rise of 12 per cent m-o-m, though a decline of 20 per cent Y-o-Y.

Upcoming data:

Investors look forward to US CPI and PPI data (May) to be released June 11 and June 12 respectively. Going by the estimates, CPI readings are likely to be hotter than the prior month readings.

Outlook:

Silver has shattered a 14-year ceiling as it surged above $35 level. Gold/silver ratio has fallen nearly 14 per cent from the cycle peak of around 105 to 91 presently. Huge ETF inflows and UK’s solar mandate are positive developments for the metal.

  As Gold/Silver ratio has a strong support at 90, silver is expected to move in line with gold in very short term.

  US-China trade talk outcome is somewhat underwhelming as key issues of China’s exports of rare-earth magnets remain unresolved, which may impair risk appetite to some extent, leading to a slightly higher gold/silver ratio.  Overall, dip buying is advisable. Silver is likely to test the resistance at $37.50 (MCX July contract ₹109,000). A decisive breach of this resistance will open the way for $40 (₹116,500)—the psychological resistance. The white metal is expected to rise to $42 (₹1222,000) in the coming weeks. Support is at $35.90 (₹104,700)/$35 (₹102,000)/$34 (₹99,200).

  (Disclaimer: This article is by Praveen Singh – associate VP, fundamental currencies and commodities, Mirae Asset Sharekhan. Views expressed are his own.)