Analyst bullish on silver for long-term; $70-$84 range seen in short term

China, being on holiday until February 23, has weakened the buying support in silver. However, geopolitical concerns continue to support.

Performance:

Spot silver continues to trade in its nearly two-week-old wide range of $70-$84 as the metal is caught between the improving US economy and geopolitical tensions. At the time of writing this article, the white metal was trading with a daily gain of 1 per cent at $77.96. The MCX March Silver contract was trading at ₹2,42,000, down nearly 0.93 per cent for the day.  

Geopolitics watch:

• Middle East tensions remain elevated as the US-Iran negotiations and tensions hog the limelight. Trump warned that Iran should make a meaningful deal in ten days, otherwise bad things would happen. An adviser to Trump has assigned a 90 per cent probability of the US striking Iran this week, though The Guardian reported that some of them have said that all the military forces deployed to the region should be in place by Mid-March. 
• Iran's atomic energy chief Mohammad Eslami has asserted that no country can deprive the Islamic Republic of its right to nuclear enrichment.
• Going by betting sites, the odds of Iran's Supreme Leader Khamenei’s removal from power before September jumped by 12 per cent to 48 per cent on Kalshi.
• The IEA warned that Iran’s window to reach a diplomatic agreement over its atomic activities is at risk of closing as the US builds up a massive military presence in the region.

FOMC minutes:

Minutes of the January 28 FOMC meeting revealed broad agreement to hold the key rate steady. Several members cautioned against easing policy further amid elevated inflation, though many members remained open to more rate cuts if inflation declined as they expected. The minutes showed that Inflation progress could be slower than generally forecast. Some of the members suggested a potential rate hike should inflation continue to remain elevated. Overall, the minutes tilted on the hawkish side.

 

Data update:

US trade deficit widened from $53B in November to $70.30B in December as imports rose 3.6 per cent month-on-month (M-o-M) vs the estimate of 0.1 per cent, whereas exports fell 1.7 per cent vs the forecast of 0.1 per cent. Philadelphia Fed Business Outlook Index surged from 12.60 in November to 16.30 in December (forecast 7.5). Weekly job data and ending home sales data were mixed, though.

 

The recent US macroeconomic data have been mostly encouraging as the January nonfarm payroll was upbeat in terms number of jobs added, unemployment rate, earnings and manufacturing jobs. ADP employment change in the week ending January 31 came in at 10.25K vs the upwardly revised estimate of 7.75K jobs. November housing starts at 1,32,200 beat the estimate of 1,30,800, while December housing starts in January came in at 1,40,400 jobs (estimate 1,30,400). Industrial production (January) rose 0.7 per cent (forecast of 0.4 per cent), the fastest pace since February 2025.  ALSO READ | Gold outlook: Range-bound trade likely; analyst suggests buying at dips

US Dollar Index and yields:

At the time of writing, the US Dollar Index, buoyed by the US data and hawkish FOMC minutes, was trading with a gain of 0.2 per cent at 97.88. Ten-year yields were flattish around 4.09 per cent, while two-year at 3.47 per cent was up one basis points (bps).

US Supreme Court decision on tariffs:

The US Supreme Court (SCOTUS) may strike down US President Trump’s tariffs as soon as this week. It is to be noted that Lower courts have already ruled that he exceeded his authority by invoking the 1977 International Emergency Economic Powers Act (IEEPA) in implementing his sweeping “reciprocal” duties. If the SCOTUS rules that IEEPA can’t be used to impose tariffs, there are alternative ways, like replacing its tariffs with licenses.

ETF and COMEX Inventory:

As of February 18, total known global silver ETF holdings stood at 829.59 MOz, down by nearly 4 per cent year-to-date (Y-T-D). Registered COMEX silver inventory has fallen steeply by over 55 per cent from the record peak of 201 MOz to 88.79 MOz, lowest since November 2024.

Shanghai futures exchange silver inventory:

Shanghai Exchange silver on-warrant stock has slumped from 3,091 tons in January 21 to 353 tons, the lowest level in more than a decade as it amounts to a steep decline of 88.57 per cent.

LBMA lease rate:

One-month LBMA silver lease rate at 1.74 per cent has eased considerably from over 6 per cent rate seen at the beginning of the month; however, it remains well above the historical average of 0.3 per cent-0.5 per cent.

Outlook:

China, being on holiday until February 23, has weakened the buying support in the metal. However, geopolitical concerns continue to support. Silver is expected to keep its $70-$84 range in the short term. Overall, we remain quite bullish on the metal for medium-to-long term horizons.  (This article is by Praveen Singh, head currencies and vommodities at Mirae Asset Sharekhan. Views expressed are his own.)