Silver: Seen range-bound before breaking higher
Performance
Spot silver at the time of the MCX closing was trading at $33.67, down around 0.10 per cent on the day. The metal recovered sharply on Thursday after Wednesday's sell-off that came on lack of details on the BRIC’s proposed alternate payment system; it rallied to $34.30. However, it gave back all its gains to trade mostly steady as stronger-than-expected US data weighed on the metal.
It traded in a wide range of around $1.
The MCX December silver contract was steady at Rs 96,955.
Data roundup
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The US data released Thursday were largely encouraging. Initial jobless claims 242K (forecast 227K); S&P global US manufacturing PMI (October prel.) 47.80 (forecast 47.50); S&P services PMI 55.30 (forecast 55); Composite PMI at 54.3 (forecast 53.80); and new home sales (September) at 738K (forecast 720K) topped their respective estimates.
PMIs out of Europe were largely mixed.
US Dollar Index and yields
The US Dollar Index retreated from the cycle high of 104.435 to 104.05 and was down around 0.40 per cent on the day as the US yields eased. The 2-year and 10-year yields were down over 1 per cent as the bond sell-off took a technical breather on Thursday.
BRICS summit 2024
At the Kazan Summit, BRICS members came out with a join declaration encouraging the strengthening of correspondent banking networks within BRICS and enabling settlements in local currencies in line with BRICS Cross-Border Payment Initiative (BCBPI). Russia argued for integrating the depositories of member states under a BRICS Clear Umbrella to ensure uninterrupted cross-border securities transactions as an alternative to the Euroclear and ClearStream systems, though reportedly only few members seem to be interested in joining a common depository presently. Central bank officials from BRICS nations plan to discuss the unified payment system in December. IMF Managing Director Georgieva said the Fund wanted additional information about the proposal payments system to assess how it may translate into reality.
Upcoming data
Friday’s US data include durable goods orders (Sept. prel.), University of Michigan sentiment (Oct. final) and University of Michigan inflation expectations.
ETF and inventory
Total known global silver ETF holdings stood at 741.45 MOz as on October 23- the highest level since July 2023.
The ETF holdings are headed towards third monthly gain. COMEX Silver inventory at 307.172 MOz were higher on the week and were around a 2-year high level.
Outlook
Spot silver outlook remains constructive on the US deficit concerns, elevated geopolitical tensions, China’s recent stimulus, healthy ETF inflows and record industrial demand. However, as the US yields may rise further in the near term, the metal may consolidate its hefty gains made in October. It has surged around 12 per cent this month.
Silver is expected to trade in a wide range of $32.50 to $35. As the US yields may resume their northbound journey soon, buying the dips is the most preferred strategy.
Interim support is at $33 (Rs 95,000), while interim resistance is at $34.30 (Rs 98,800).
We look for a target of $37 (Rs 106,000) in the coming months.
(Disclaimer: Praveen Singh – Associate VP, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas. Views expressed are his own.)