Trading Strategy: Here's how to trade Silver today; key levels to watch

Praveen Singh, head of currencies and commodities at Mirae Asset Sharekhan, recommends buying on dips rather than chasing the rally. He also advises closely monitoring the geopolitical situation

Silver: Buoyed by strong ETF inflows

Performance

On August 21, silver swung between $37.53 and $38.21. At the time of writing, spot silver was changing hands at $38.10, up around 0.50 per cent for the day, while the MCX Silver contract at Rs 113,685 was up 1 per cent.

President Trump pushes against renewable energy:

 

In a negative development for the metal, President Donald Trump on Wednesday said his administration will not approve solar or wind power projects. This is even though electricity demand is outpacing the supply in some parts of the U.S. Silver may experience some volatility due to Trump’s comments. It is to be noted that China is grappling with the problem of overcapacity in solar panel industry and is trying to reduce the capacity.

 

Geopolitical watch

Geopolitical tensions over the Ukraine situation are once again in focus as Russia insisted it must have a veto over any postwar support for the country. Adhering to a tough stand over the Ukraine war, Russia’s foreign minister Lavrov said European proposals to deploy troops in Ukraine after a settlement would amount to foreign intervention, which is unacceptable to Russia.

Meanwhile, the US President urged Ukraine to increase its offensive against Russia as Russia launched a severe missile attack on Ukraine on August 21.

Data roundup

The US data released on Thursday were mixed. The weekly job report suggested a weakening job market as initial jobless claims jumped from 224K to 235K (highest level since June) Vs the forecast of 225K, while continuing claims rose to 1.997 million in the week ending August 9, the highest since November 2021. Philadelphia Fed Business Outlook (August) slumped from 15.90 to -0.3 (in contraction now) and below consensus forecast of 7. August prices rose while employment fell. It is to be noted that the NY Fed services activity Index released on Monday also showed contraction. Leading Index (July) at -0.1 per cent matched the forecast. S&P global US manufacturing PMI (August prel.) surged to 53.3 Vs the forecast of 49.70 and the prior reading of 49.80. S&P Global US composite PMI rose to 55.40 from 55.10 and beat the forecast of 53.50. Existing home sales (July) at 4.01 million topped the estimate of 3.92 million. 

Eurozone's PMIs were largely encouraging as Eurozone manufacturing at 50.50 topped the estimate of 49.50, services PMI at 50.70 trailed the estimate of 50.80 while composite PMI at 51.10 beat the forecast of 50.60.

UK's PMIs were also mostly positive as services PMI and composite PMIs comfortably beat the respective estimates while manufacturing PMI contracted more than expected.

US Dollar Index and yields

The US Dollar Index at 98.57 was around 0.40 per cent higher for the day as it reached the highest level since August 11 on rising yields on encouraging PMIs. 

The 10-year yields at 4.33 per cent were up nearly 4 bps, while 2-year yields at 3.79 per cent rose more than 1 per cent.

ETF holdings:

 

As of August 20, total known silver ETF holdings stood at 802.03 MOz as investors have added nearly 10 MOz this week. The holdings have risen 12 per cent YTD and are at the highest level since November 2021. All-time record high ETF holdings level is 1.021 billion Ounces seen on February 2, 2025. COMEX inventory currently at 508 MOz is at a record high.

Upcoming data and event

The major event of the day is the Fed's Chair Powell speech at Jackson Hole Symposium which would commence at 7:30 PM.

Today, Japan will report its national CPI (July). Inflation in Japan continues to run much higher than the BoJ's inflation goal of 2 per cent. Germany's Q2 GDP data are also on the cards.

Outlook

Silver is getting a strong support from huge ETF inflows. Holdings have risen around 312 tons this week itself. Improvement in global PMIs is positive for the metal, though Chinese PMIs and Trump’s rhetoric against solar power are negative factors for the metal. Silver is expected to be highly volatile in the wake of Powell’s speech. Hints at easing would be quite positive for the metal. 

 

At the same time, a tempered speech may lead to profit booking. Buying the dips is preferred over chasing the rally. Geopolitical situation needs a close monitoring, too. Support is at  $37.40 (₹1,11,500)/$36.95 (₹1,10,200). Resistance is at $38.75 (₹1,15,600)/$39.13 (₹1,16,700)/$39.53 (₹1,18,500).

 

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