Silver price outlook: 'Buy on dip' suggests analyst; check key levels here

Silver price outlook: The white metal at $36.69 was up around 1.1 per cent on the day as the US Dollar Index slumped for the fifth straight day amid healthy risk appetite

Silver: Up on healthy risk appetite as Dollar falls for the fifth consecutive day 

Performance:

Spot silver traded between $36.24 and $36.84 on Thursday. The white metal at $36.69 was up around 1.1 per cent on the day as the US Dollar Index slumped for the fifth straight day amid healthy risk appetite.

 

MCX September contract at ₹108,000 was up by ₹860.

 

Data roundup:

The US data dump on Thursday turned out to be mixed as the advance trade deficit (May) at $96.60 billion was wider than the expected figure of $86.10 billion due to a drop in exports as monthly imports were steady. Inventories data were mixed. The final reading of Q1 gross domestic product (GDP) came in at -0.5 per cent, which trailed the forecast of -0.2 per cent, as consumption was revised lower. Spending on services contributed merely 0.3 per cent to the GDP in Q1, the least since 2020 Q2, as all seven major categories of services spending were revised lower.  

 

 

Overall, consumer spending increased at 0.5 per cent Vs the initial estimate of 1.2 per cent. Chicago Fed Nat activity Index (May) was weaker than expected as durable goods orde₹(May preliminary), driven by aircraft came in at 16.4 per cent which beat the estimate of 8.5 per cent. Even the ex-transportation component at 0.5 per cent was stronger than the estimate of 0 per cent. 

 

The weekly job data report was mixed as initial jobless claims at 236,000 were lower than the forecast of 243,000, while continuing claims were more than expected. Pending home sales (May) came in at 1.8 per cent against the forecast of 0.1 per cent.

 

US Dollar Index and yields:

The US Dollar Index slumped to 96.99, lowest since February 2022 as traders boosted Fed rate cut wagers.

 

The US Dollar Index weakened on the speculation that the US President Trump may announce the name of the next Federal Reserve Chair early, which means that a Fed Chair of his choice may be more open to hasten the rate cuts or may influence the Fed’s stance to become dovish as compared to the present balanced stance of ‘wait and watch’. The Wall Street Journal reported that Trump may announce Jerome Powell’s replacement as soon as September.

 

The Index, at the time of writing was at 97.11, down 0.58 per cent on the day as it fell for the fifth straight day.

 

Ten-year US yields at 4.25 per cent were down around 0.88 per cent on the day as the yields fell for the sixth straight day.

 

September rate-cut bets:

A flurry of mixed US data released on Thursday has boosted bets of September Fed rate cuts as the consumption component of the GDP was revised lower. Markets see more than 2 rate cuts this year.

 

Geopolitics watch:

Iran's Supreme Leader Khamenei claimed victory in the war with Israel and said that the US's involvement in the war achieved nothing. The FT reported Thursday that European officials believe that Iran's stockpile of enriched Uranium remains largely intact. However, the US President Trump maintains that the enriched uranium was obliterated in the attack. Iran's Guardian Council suspended a law of cooperation with the IAEA as Iranian officials condemned the Agency for violating its own rules of neutrality. However, it is to be noted that Iran can only legally end cooperation with the Agency if it formally withdraws from the nuclear non-proliferation treaty. 

 

Powell's testimony:

The Fed Chair Powell testified before the House Financial Services Committee on Tuesday. He reiterated his stance of 'wait and watch' and insisted that the Fed should not rush to rush policy rate amid tariff uncertainty, though, in his testimony before the Senate Banking Committee on Wednesday, he acknowledged that rates are somewhat restrictive, which is being deemed as negative for the Greenback.

 

The US President Trump called on Powell to lower rates as he continues to criticize Powell for not cutting rates. Powell's term as the Fed Chair ends in July 2026.

 

NATO sets new military spending target:

On June 25, NATO's 32 member countries agreed to set a new goal of spending 3.5 per cent of their respective GDPs on defense and a further 1.5 per cent in security-related matter by 2035; thus, taking the total defense spending up from 2 per cent to 5 per cent, though some members like Spain and Slovakia have raised doubts about meeting the target.

 

Tariff developments:

Chinese Premier Li Qiang urged global leaders not to let trade disputes become overly politicized.

 

ETF:

As of June 26, total known global silver ETF holdings stood at 769.77 MOz -- highest since August 2022. Silver ETF holdings are up around 7.4 per cent YTD as holdings are on track to rise for the seventh straight week.

 

CFTC:

Money managers boosted their net-long silver position at the COMEX to more than 5-year high as the long-only total rose to the highest in more than three years.

 

Upcoming data:

Today's major US macroeconomic releases include real personal spending (May), PCE price Index (May) -- the Fed's preferred inflation gauge, University of Michigan sentiment (June final) and one-year and five-ten-year inflation expectations.

 

Outlook:

Silver rally is accompanied by rallies in platinum and palladium, too, as these metals, like silver, have broken out of their respective multi-year ranges. Platinum jumped to the highest level since 2014, as it surged to $1,400, highest since 2014, due to supply concerns. Similarly, palladium has surged to the highest level since 2024.

 

In the very short-term, silver is also supported by Europe’s defense spending plans and firm base metals. A weakening US Dollar is in general positive for commodities. 

 

Record high industrial demand and investors’ interest in the metal leading to a fifth straight year of deficit continue to provide a constructive backdrop for the metal.

 

Unless risk sentiments deteriorate significantly, $35 level (₹1,03,000) may act as a new floor for the metal in near term. It needs to take out the strong resistance at $37.5 (₹1,10,300) to extend its rally to $40 (₹1,17,000) – a psychological resistance. Interim support is at $36.25 (₹1,06,700).

 

Traders closely watch the gold/silver ratio as it has a strong support at 90, a breach of which will further boost the bullish momentum of silver. Dip buying is preferred.

  (Disclaimer: This article is by Praveen Singh, senior fundamental research analyst- currencies and commodities, Mirae Asset Sharekhan. Views expressed are his own.)