Silver strategy today: Key trading levels, support, resistance to watch

Performance 

On August 7, spot silver traded between $37.82 and $38.51-- highest since July 25. At the time of writing this article, the grey metal was trading at $38.15, up around 0.60 per cent for the day as it rallied for the fifth straight day. The MCX September contract was changing hands at ₹114,280.

 

Fed Watch  

The Fed Governor Christopher Waller is emerging as a top candidate for the Fed Chair job as Trump Advisor are said to be impressed with Waller's forecasting acumen and his deep knowledge of the Fed System.

 

Tariff Developments 

US-China trade truce: The US Commerce Secretary Howard Lutnick said that the Trump Administration will likely extend the tariff truce with China.

 

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  Chips tariff: The US President declared plans to slap a 100 per cent tariff on semiconductor imports but companies moving their production back to the US will be exempted. US Tariffs become effective: US tariffs have become effective from August 7; the average US tariff rate will rise to 15.2 per cent -- highest since second World War.

 

Data and event roundup

  The US data released Thursday showed that nonfarm productivity (2Q Prel.) at 2.4 per cent topped the estimate of 2 per cent as the prior reading was revised lower from -1.5 per cent to -1.8 per cent. Unit labour costs (2Q prel.) at 1.6 per cent topped the estimate of 1.5 per cent.

  Weekly job report was weaker than expected as initial jobless claims came in 226K Vs the estimate of 222K, while continuing claims rose to from 1936K to 1974K—highest since November 2021-- as against the forecast of 1950K.

As widely expected, despite high inflation, Bank of England cut the benchmark rate by 25 bps from 4.25 per cent to 4 per cent in a 5-to-4 decision following a deadlock that forced the MPC into an unprecedented second vote. The MPC flagged upside risks to consumer prices as the forecast for economic growth in 2025 was also upgraded slightly to 1.25 per cent.

China's trade data- Despite tariffs imposed by President Donald Trump, growth in shipments from China gathered pace in July as suppliers looked for diversification. The total value of exports jumped 7.2 per cent from a year earlier, Vs the forecast of 5.6 per cent growth. Even imports rising by 4.1 per cent y-o-y Vs the forecast of -1 per cent was a solid performance.

 

Upcoming data and event 

Next major data on the card is US CPI (July) that will be released on August 12. The data may show inflation gathering pace. China's CPI and PPI data (July) will be released on August 9. 

The Kremlin reported that the President Putin and the President Trump plan to meet shortly and details are being finalized. The White House is pushing to include the President Zelenskiy in the meeting, though Russia does not find the conditions to be right to include him.

 

US Dollar Index and yields 

At the time of writing this article, the US Dollar Index was hovering near 98.29, up 0.12 per cent on the day, as it rose for the first time after four straight days of losses. The Index is up nearly 1.65 per cent from the cycle-low of 96.37 reached on July 1, which also happens to be the lowest level since February 2022.

Two-year and Ten-year yields were up 2 bps each at 4.24 per cent and 3.73 per cent respectively.

 

ETF and COMEX Inventory 

As of August 6, total known silver ETF holdings stood at 787.82 MOz-- near 3-year high. COMEX Silver inventory at 505.98 MOz continues to hover around the record-high level of 507 MOz registered on August 1. ETF holdings are up 9.91 per cent YTD.

 

Silver Outlook

  Silver rally is primarily being driven by risk sentiments as expectations of rate cuts buoy the risk assets. Another supporting factor is healthy ETF inflows. Weak US nonfarm payroll report and Weak PMIs out of China and the US pose a downside risk to the metal.  

Risk appetite may improve further should US-China extend their trade truce. Investors need to monitor US yields and trade tensions. Silver may test resistance at $38.75 in the near term. A successful breach of this crucial level will open the way to $39.53—the cycle-high. Risk appetite is an important factor for the metal in short-term. Support is at $37.50 (₹112,300 at INR/USD rate of ₹87.43)/$36.67 (₹109,700). Resistance is at $38.75 (₹116,000)/$39.53 (₹118,400). Buying the dips is preferred over chasing the rally.  (Disclaimer: Praveen Singh is vice president of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)