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

Support for Silver is at $31.77 (Rs 94,000) /$31.11 (Rs 92,000). Resistance is $32.55 (Rs 96,300)/$33.45 (Rs 99,000)

Silver: At a three-month high as the US Dollar Index and yields ease

 

Performance

 

Silver, at the time of writing this report, was trading at $32.37, up around 2.40 per cent on the day, as it extended its this year’s rally to a 3-month high level. The MCX March contract was at Rs 95,800, up around 1.60 per cent.

 

The metal rallied as the US Dollar Index and yields fell on disappointing US JOLTs openings data. Risk-on sentiments, on the US postponing tariff hikes on Mexican and Canadian imports also weighed on the US Dollar Index.

 

Silver was up around 2.2 per cent last week as it gained for the second consecutive week. It is up nearly 12 per cent YTD.

 

 

Data roundup

 

The US JOLTs openings (December) data, released on Tuesday, showed that job openings fell to 7.6 million in December from 8.16 million in November, lowest since September, though hiring held at 3.4 per cent, still around the lowest in a decade, while quit rate was steady at 2 per cent. Factory orders (December) came in at -.9 per cent (forecast -0.8 per cent), whereas durable goods orders (December final) at -2.2 per cent matched the forecast.

 

S&P US Global manufacturing PMI (January final) came in at 51.2 (forecast 50.10) whereas the US ISM manufacturing (January) with a reading of 50.90 (forecast 50) shot back into the expansion zone for the first time after 26 straight months of contraction. ISM prices paid at 54.90 were hotter than the estimate of 54.2 as ISM employment showed expansion with its reading of 50.30 topping the forecast of 52. Even new orders topped the estimate.

 

Upcoming data

 

Today's US data include ADP employment change (January), trade balance (December), S&P global US services PMI (January final) and ISM services Index (January).

 

US Dollar and yields

 

The 10-year US yields continue to swing largely between 4.50 per cent and 4.60 per cent. The yields, at the time of writing this report, were at 4.52 per cent, down nearly 2 bps on the day, as bond rallied on lacklustre US JOLTs openings data. The two-year yields have been moving largely in the 4.20 per cent-4.30 per cent since mid-January. The yields at 4.21 per cent were down around 1 per cent on the day.

 

The US Dollar Index, after surging to 109.88 on February 3 on trade war concerns, the highest level since January 13, has eased below 108 as tariffs on Canada and Mexico have been delayed by at least a month. The Index was at 107.99, down nearly 1 per cent on the day.

 

Impact of advancement in solar panel technology and Trump’s policies on silver demand:

 

Trump’s executive orders put the nonbinding Biden’s directive that 50 per cent of all new passenger cars and light trucks sold in 20230 should be zero-emission vehicles. His clean energy rollbacks jeopardize a popular federal income tax credit of up to $7,500 for the purchase of electric and plug-in hybrid cars. He has frozen the disbursement of funds set aside to build new EV chargers

 

New technologies reducing the need for busbars in solar panels may also impact silver demand from the solar panel industry. However, demand for silver from other industries like AI is expected to keep the demand for the metal buoyant.

 

ETF and COMEX inventory

 

Total known global silver ETF holdings fell to 703.763 MOz on January 3, a fresh cycle low. The ETFs have recorded a net outflow of nearly 13 MOz this year. COMEX Silver inventory stood at 350.059MOz as on January 3, highest since October 2021.

 

Outlook

 

Precious metals have continued to extend their sharp rallies this year on rate cut notions, subdued yields, inability of the US Dollar to rise on a consistent basis and occasional safe haven demand on tariff concerns and other economic uncertainties. Apart from rate cut expectations, subdued yields and Dollar have also played the major roles in this ongoing rally.

 

Silver may rise to $33.45/$33.50 level in this rally; however, traders need to be cautious ahead of US ISM services, ADP employment change and the US nonfarm payroll data, more so as the rally is looking somewhat overdone.

 

Support is at $31.77 (Rs 94,000) /$31.11 (Rs 92,000). Resistance is $32.55 (Rs 96,300)/$33.45 (Rs 99,000).

 

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