Silver price outlook: White metal may rise to $40 level; check key levels

Silver price outlook: On July 3, spot silver traded between $36.34 and $37.07. At the time of writing, the gray metal was trading at 36.85, up around 0.82 per cent on the day

Silver price technical analysis:  Performance:

On July 3, spot silver traded between $36.34 and $37.07. At the time of writing, the gray metal was trading at 36.85, up around 0.82 per cent on the day. The MCX September silver contract at  ₹1,08,200 was up around 0.6 per cent.

Data roundup:

US nonfarm payroll (June) was largely reassuring as US employees added 1,47,000 jobs against the expectation of 1,06,000 jobs, which belied the fears of job losses as portrayed by ADP report released on Wednesday. 

 

Two-month payroll net revision stood at 16,000 as unemployment rate unexpectedly slid from 4.2 per cent to 4.1 per cent Vs the estimate of 4.3 per cent. However, the decline in unemployment rate has been driven by jobseekers, especially foreigners, leaving the workforce pool due to deportation, lack of job opportunities, etc. Labour force participation rate edged lower from 62.4 per cent to 62.3 per cent (forecast 62.4 per cent). 

 

 

Average hourly earnings rose 0.2 per cent m-o-m and 3.7 per cent against the respective forecasts of 0.3 per cent and 3.80 per cent. ISM Services Index crept back into expansion territory after a month as the largest component of the US economy posted a reading of 50.8; thus, beating the estimate of 50.6 as new orders expanded, though services employment contracted more than expected.

 

The Eurozone's composite PMI data (June final) rose to 50.60, fastest since March, while China's Caixin PMI composite slowed down from 51.10 to 50.60 (forecast 50.90).

 

Tariff developments:

US Treasury Secretary Bessent said on July 3 that President Trump will decide whether to extend the July 9 tariff hike deadline.

 

Earlier on July 2, the US and Vietnam finalised a trade deal in principle under which Vietnam will pay 20 per cent tariffs on its US exports, whereas the US will pay 0 per cent tariff on its exports to Vietnam. In addition, the US imposed a 40 per cent tariff rate on Vietnam's transhipments which is likely to make Chinese goods exported through Vietnam to US costlier. 

 

It is to be noted that a significant share of Vietnam's exports to the US includes goods like air pods, phones, etc assembled with Chinese parts in Vietnam's factories. As per Lowly Institute (Sydney) 28 per cent of Vietnamese exports to the US were made up of Chinese components in 2022. Chinese exports to Southeast Asia have surged this year.

China is assessing the US-Vietnam deal and warned against clauses harming its business interests.

 

China is speeding up approving rate earth exports to European companies.

 

Trump scores a major economic policy victory:

The White House passed Trump’s $3.4 trillion tax cut and spending bill, which is positive for silver on deficit concerns. 

 

Dollar Index and yields:

US Dollar Index fell to a fresh cycle low of 96.377, lowest since February 2022, on July 1 on Fed rate cut notions. The index, at the time of writing, was hovering around 97.14, up nearly 0.5 per cent on the day as US data boosted the Greenback.

 

US 10-year yields, which slumped to 4.18 per cent on July 1, lowest since May, rose for the third straight day, and was noted at 4.35 per cent, up nearly 2 per cent on the day, as July rate cut hopes faded on stronger than expected US job and ISM services report.

 

ETF:

Total known global silver ETF holdings at 773.283 MOz are at nearly 3-year high as holdings are up nearly 8 per cent year-to-date (Y-T-D).

Silver Institute’s deficit forecast:

The Silver Institute sees the silver market registering a deficit of 117.60 MOz in 2025, which will be nearly 21 per cent smaller than the estimated 2024 deficit. 

Outlook:

Positive surprise in the US, European and Chinese PMIs along with a somewhat encouraging US nonfarm payroll report will support the metal. Risk appetite is expected to be healthy unless tariff frictions come to the fore yet again. Positive ETF inflow is a crucial bullish factor.

 

Silver is expected to rise to $40 level (₹117,000) in the coming weeks unless risk appetite gets impaired due to tariff issues.

 

Support is at $35.80 (₹1,05,000)/$35.50 ( ₹1,04,200). Major resistance is seen at $37.50 (₹1,10,000).  (This article is by Praveen Singh, senior fundamental research analyst- currencies and commodities, Mirae Asset Sharekhan. Views expressed are his own.)