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Silver: Surges to a fresh 14-year high on huge ETF inflows amid further rate cut expectations

Performance

A blistering rally in silver continued September 25 as the grey metal surged past $45 for the first time in the last 14 years. The metal traded between $43.77 and $45.08 on Thursday. At the time of writing this article, it was changing hands at $44.76, up 1.93 per cent for the day. MCX December Silver contract at ₹1,36,700 was up by 2 per cent for the day.

 

Spot silver, having risen for five consecutive weeks, is on track of posting its sixth straight week.

 

 

The metal has surged 21 per cent from its low of $36.96 made on September 22.

Data roundup

Final reading of US 2Q GDP showed that the US economy grew 3.8 per cent annualized rate Vs the forecast of 3.3 per cent as 2Q personal consumption was revised higher from 1.6 per cent to 2.5 per cent Vs the estimate of 1.7 per cent. Consumer spending is likely to pick up in early 2026 due to President Trump's tax law and lower rates, though the expected GDP growth below 2 per cent is likely to be subpar. Core PCE Price Index QoQ rose 2.6 per cent, faster than the forecast of 2.5 per cent. Average good trade balance for August at $85.50 billion was lower than the expected deficit of $95.40 billion. 

 

Durable goods orders surged 2.9 per cent in August Vs the estimate of 0.3 per cent as even ex transportation orders rose by 0.4 per cent, solidly higher than the forecast of 0 per cent. Initial jobless for the week ending September fell from 232K to 218K, lowest since July 18. Even continuing claims eased. Steep decline in jobless claims, which have been heavily influenced by fraud in taxes and technical errors in North Carolina, could be attributed to normalization of Texas data. Existing home sales in August stood at 4 million, higher than the forecast of 3.95 million.

 

EU27 new car registrations rose 5.3 per cent in August following a rise by 7.4 per cent in July.

Fedspeak

On September 25, Federal Reserve Governor Miran said the Fed should cut rates rapidly as the economy is vulnerable and interest rate is highly restrictive because it is well above its estimate of 'neutral rate'. He urged the Fed to bring rates down to neutral level quickly, rather than moving slowly over the course of the year.

Dollar Index and US yields

Dollar Index has been gaining upward traction as the Fed Chair Powell cited inflation concerns in his speech on September 23. Encouraging US data also support Greenback. The Index, at the time of writing this article, was trading at 98.40, up 0.52 per cent for the day.

 

US bonds came under pressure on encouraging US data, which sent yields higher. Ten-year US yields at 4.187 per cent were up by nearly 1 per cent as 2-year yields rose nearly 5 bps to 3.65 per cent. 2-year yields have risen around 6 per cent since the September 17 FOMC low of 3.46 per cent.

Silver ETF

Total known global silver ETF holdings stood at 820.48 MOz on September 24, a fresh cycle high and highest since mid-July 2022.

 

Silver ETF holdings have risen 14.91 per cent Y-T-D, which amounts to an inflow of 3311 tons this year so far. Investors have added nearly 622 tons of silver to their ETF portfolios since the Fed Chair Powell's speech on August 22.

Gold-silver cross

Due to sharp surge in silver prices, Gold-silver cross has slumped to 83.44, lowest since December 2024. The ratio may briefly test the support around 80, which would be positive for silver. 

Geopolitical watch

Russia's incursions into Estonia, Finland and Poland are being broadly seen as an act of aggression by NATO. President Trump in his speech on September 23 said that NATO nations should shoot down Russian aircrafts that enter their airspace. So far NATO allies have shown mixed reactions on this episode, though tension remains elevated.

India imposes restrictions on silver jewellery imports

India’s government on September 24 imposed import restrictions on plain silver jewellery till March 31 next year. Per the government, the decision will help India's jewellery manufacturers and workers in the sector.

Upcoming data

Today's major US data on tap include real personal spending (August), PCE Price Index (August) -- Fed's preferred gauge of inflation, and University of Michigan sentiment along with inflation expectations.

 

Next week will be quite crucial for markets as US ISM manufacturing (September), ISM services (September), ADP employment change (September) and nonfarm payroll report (September) will be released. Focus will be on PMIs out of the Eurozone, the UK, Japan, and China, too.

 

Apart from the data, investors will also parse the speeches of Fed officials for their take on US monetary policy trajectory.

Outlook

Huge surge in silver ETF inflows is the major driver of this stunning ongoing silver rally as Fed rate cut expectations boost investors’ sentiments. Gold-Silver ratio breaking below the strong support at 85 is a positive development for the grey metal.

 

Today’s US PCE Price Index data will be crucial for the market, more so as the US Dollar is strengthening, though Dollar needs to rise on a sustainable basis to keep commodities under pressure.

 

Silver is likely to rise further to test resistance at $46 (₹1,40,500)/$47 (Rs 143,500), though two-way moves will not be surprising following the huge surge in the past few days. Support is at $43.50 (₹1,32,800)/$43 (₹1,31,000)/$41 (₹1,25,000).

 

Further rate cuts may help the metal to rise to $50 by the year-end.

 

(Disclaimer: Praveen Singh,  head of currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)