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

Silver: Highest closing level in nearly three and a half months

 

Performance

 

On February 18, spot silver closed with a hefty gain of over 1.5 per cent at $32.89. Silver, ignoring higher yields and a firmer Greenback, rallied as it followed gold higher.

 

Risk appetite was healthy as wider markets were mostly bid in the wake of Russia-US discussions over ending Russia-Ukraine war. Energy complex was up as crude oil was up on supply concerns emanating from a drone attack at a Russian pipeline, while natural gas was sharply higher on weather related demand factor. It is highest daily close since October 30.

 

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Geopolitics watch

 

Top US and Russian officials met in Riyadh, Saudi Arab, to discuss the course of peace process to bring Russia-Ukraine war to an end. The discussion did not include Ukraine though. Both the sides pledged to appoint high-level teams to achieve the peace objective as soon as possible. US Secretary of State Marco Rubio indicated that the two sides will prepare to restore staffing at their respective embassies. The two sides also agreed on laying the groundwork for future cooperation on matters of mutual geopolitical interest once the war ends.  Also Read: Gold Trading Strategy

 

Data roundup

 

US NAHB Housing Market Index (February) fell from 47 in January to 42, a five-month low, and trailed the estimate of 46.

 

The UK's labour report was solid as unemployment rate came in at 4.4 per cent (forecast 4.5 per cent) in Q4 and earnings accelerated at the fastest pace in eight months. Wages excluding bonuses jumped 5.9 per cent in Q4 2024 from a year ago level. The number of payrolled employees rose 21K (forecast -30K) in January. Traders have pared down expectations for BoE rate cuts following the data.

 

Germany's ZEW survey expectations (February) came in at 26, the best reading since July 2024, as against the forecast of 20. Even the Eurozone's ZEW survey data showed an improvement over the prior data.

 

US Dollar and yields

 

The US bonds followed their European peers lower as the latter fell on the notion that after the US backing out from the coalition, European nations will have to shore up funding to meet defence and reconstruction efforts.

The ten-year US yields settled at 4.55 per cent, the highest since February 12, and were up nearly 1.7 per cent on the day. The two-year yields at 4.306 per cent were up by over 1 per cent.

 

The US Dollar Index rose to 107.05, a three-day high, as yields shot up, and was up around 0.45 per cent on the day.

 

Fedspeak

 

Federal Reserve Governor Christopher Waller said that that rates will likely stay on hold for now due to prices; however, if going ahead inflation subsides like last year, rate cuts will happen. Patrick Harker, the Philadelphia Fed President said that he remains optimistic that inflation will continue a downward path and the policy rate will be able to decline over the long run. Federal Reserve Bank of San Francisco President Mary Daly said policy needs to remain restrictive as more progress on inflation is required, though she expects that inflation will continue declining over time.

 

Upcoming data

 

Today's US data include net long-term TIC flows and housing starts (January). Traders will look forward to FOMC minutes (January 29 meeting), too.

 

Major European data include UK CPI (January). China will release its new and used home prices data (January).

 

Upcoming events

 

The Reserve Bank of New Zealand is expected to deliver a 50-bps rate on Wednesday, while Indonesia's Central Bank is expected to hold rates at 5.75 per cent as it opted for a rate cut a its last meeting. China's commercial banks are likely to keep one-year and five-year Loan Prime rates unchanged at 3.1 per cent and 3.6$ respectively.

 

Inventory and Silver ETF holdings

 

COMEX Silver inventory stood at 377.889MOZ as on February 14 -- the highest level in nearly three years; it could be because of buyers of futures contract opting for delivery, the same phenomenon as being observed in case of gold. Silver inventory at COMEX warehouses has surged sharply since tariff talks began.

 

Total known global silver ETF holdings were noted at 703.368MOz on February 17, the highest level since February 5.

 

Outlook

 

Silver is expected to push higher should gold rise to record highs. The grey metal is up around 15 per cent this year. Immediate resistance is at $33.45 (Rs 98,900) Silver MCX March contract), a decisive breach of which will open the way for the cycle high of $34.87 (Rs 103,000) made in October. It is basically the $35 mark (Rs 103,000) acting as a strong hurdle for the metal. Support is at $32.55 (Rs 96,200)/$32 (Rs 94,600)/$31.20 (Rs 92,500). Closing above $32.55 is a positive sign as such. However, given the fact that the metal is highly volatile, buyers need to put a strict stoploss. Higher yields and a stronger Dollar are the possible negative factors.  

 

(Disclaimer: Praveen Singh is an associate VP of fundamental currencies and commodities, Mirae Asset Sharekhan)