Silver trading strategy: Check Support, Resistance, other key levels here

Silver- Recovering on improved risk appetite

 

Performance

 

Spot silver traded between $29.88 and $30.50 on January 28 as it recovered some of its sharp losses incurred on Monday as it slumped 1.36 per cent to $30.19 on the heels of a selloff in the US markets on technological stocks valuation concerns. It is to be noted that cost-effective Chinese AI startup is sending ripples across the business and technology world as the China is challenging the US monopoly in the field of technology.

 

Spot silver, at the time of writing this report, was trading at $30.41, up around 0.66 per cent on the day as it recouped some of its Monday’s losses on improving risk appetite coming from a rebound in the US equities.

 

 

The MCX March Silver contract at Rs 91,062 was up 0.93 per cent. 

 

Data roundup

 

The US data released on Tuesday were slightly disappointing.

 

The US durable goods orders data (December preliminary) came in at -2.2 per cent Vs the forecast of 0.6 per cent as prior data was revised lower from -1.2 per cent to -2 per cent, though ex transportation data at 0.3 per cent showed an improvement over the prior month's data of -0.2 per cent and matched the forecast. Conference Board Consumer Confidence data (January) came in at 104.10 that trailed the estimate of 105.60.   

 

Tariff threats back in focus

 

The US President, once again threatened to impose tariffs as he wants to impose across-the-board tariffs that are much bigger than 2.5 per cent. He aims to protect his country’s interest through tariffs. Negating the idea of starting with a global rate of 2.5 per cent, he wants to make imports of computer chips. pharmaceuticals and steel costlier.

 

Renewed tariff threats weighed on industrial commodities on Tuesday. Silver followed gold higher though.

 

Upcoming data

 

US GDP and the US PCE deflator data are the major data to be released this week.

 

The US 4Q A GDP data will be released on January 30, which is likely to show an expansion of 2.7 per cent as compared to 3.1 per cent in 3Q 2024. Weekly job data and pending home sales (December) will also be on investors' radar. PCE data will be out on Friday. 

 

Upcoming event

 

The US FOMC monetary policy, to be announced tonight, will be the major market moving event. The Fed is expected to keep the Fed Fund rate unchanged at 4.25 per cent-4.50 per cent; however, traders will be interested in the Fed's assessment of economy, employment and inflation along with the Fed's view on its monetary policy.

 

It is to be noted that The Fed, in its December 18 FOMC meeting, shifted its focus from the job market to containing inflationary pressure on account of elevated inflation readings in the past months that had stalled the progress on disinflation.  The Central Bank is likely to maintain its recent hawkish shift. 

 

Markets are somewhat hopeful ahead of the FOMC decision as the December CPI readings were softer-than-expected on some counts like core CPI y-o-y. Similarly, PPI data were cooler-than-expected across-the-board.

 

LBMA survey 2025

 

As per the LBMA Survey 2025 results, silver, following gold prices higher, may trade as high as $43.50 in 2025 as the expected average for 2025 is $32.86, around 16 per cent higher than the 2024 average of $2827. 

 

Impact of DeepSeek

 

China's AI startup DeepSeek has roiled the markets and the business world due to its cost effectiveness thus putting high valuation of US technical stocks in question. As US markets tumbled, yields fell, which is somewhat positive for the white metal. 

 

US Dollar Index and Yields

 

The US Dollar Index regained its poise after three straight days of losses as it rebounded on renewed tariff threats. The Index, at the time of writing this report, was at 107.95, up around 0.58 per cent on the day, though it is still down over 2 per cent from its cycle high of 110.18 reached on January 13.

 

The ten-year US yields fell to 4.5 per cent in the wake of the rout in the US markets,

though yields recovered a bit on Tuesday ahead of the FOMC decision. The ten-year US yields at 4.57 per cent were up nearly 1 per cent on the day. The thirty-year US yields followed the suit and at 4.81 per cent were up around 0.80 per cent up. 

 

ETF and COMEX inventory

 

Total known global silver ETF holdings stood at 710.01 MOz, the lowest since September 23, as on January 27. This year, the holdings are down by nearly 6MOz. The silver ETF holdings fell nearly 7MOz last week. COMEX silver inventory at 348.60 Moz surged to a fresh cycle high and are at the highest level since September 2022.

 

Outlook

 

Falling industrial commodities, tariff threats, weak Chinese data, ETF outflows and rising COMEX inventory are bearish factors for the metal that may weigh heavily on the metal should the gold rally falter. China’s manufacturing PMI fell into contraction zone in December as the services PMI was barely in expansion zone. If the US yields surge, silver will further lag gold. Although silver is up nearly 5 per cent this year, China’s stimulus is crucial for silver to regain its lustre. India may impose additional import duty on silver in the upcoming budget on February 1, which is a huge risk for a seller. Thus, even if the Fed maintains its hawkish stance, only ultra short-term selling is advisable. Support is at $30 (Rs 89.800) /$29.60 (Rs 88,600)/$29.40 (Rs 88,000). Resistance is at $31.10 (Rs 93,000).

 

(Disclaimer: Praveen Singh is Associate VP of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)