Overview

White metal silver has seen roller coaster ride so far this year as it surged higher in the first quarter of the year by nearly 24 percent till March 2022.After testing higher of neatly $27 in COMEX and 73400 in MCX it fell sharply lower till July 2022.Silver fell nearly 32 per cent in COMEX while it fell nearly 25 percent in MCX. But prices on white metal managed to bounce back nearly 10 percent during last week of July and first half of August as weaker greenback and short covering lifted the prices higher. But recently due to sharp bounce back in dollar index prices remained under pressure.

Factors impacting Silver prices

Movement in Dollar index:

Dollar index after witnessing strong bullish momentum tested 20 year high above 109 in first week of July 2022.But in rest of July it dipped sharply lower 105 and went below 105 recently in August. The decline in dollar index lifted the bullion counter and silver jumped nearly 8 percent from its lows. In medium term any further any decline in dollar index towards 102-101 levels will be supportive for silver.

Fed interest rates

The rapid rise in interest rates by Federal Reserve is negative for bullion counter .Recently in order to curb inflation Fed has lifted its benchmark overnight interest rate by 225 points this year to a target range of 2.25% to 2.50%. The central bank is widely expected to hike rates in September by either 50 or 75 basis points.

Increasing demand from solar sector

Photovoltaic demand of silver is expected remain on firm note thereby assisting the physical demand of silver in medium to long term. Last year, 20 countries achieved 1 gigawatt (GW) of solar power, helping photovoltaic (PV) installations to reach 3,5336t, close to 11% of total silver demand. This occurred despite an 80% reduction in silver loadings per cell over the past decade.

Demand from Electric vehicles

In past few years there has been increase in usage of electric vehicles that are environment friendly and creates less pollution. Silver is largely consumed in the main electrical connector material in the battery packs, in the surrounding control modules, and as the most efficient/ reliable material for cables in onboard charging equipment. Both hybrids and even more so, battery electric vehicles, have higher silver loadings than internal combustion engine equivalents. A further boost for silver is the demand for ancillary equipment, especially in-house chargers and curb-side charging stations. The shift to EVs has also pushed investment in autonomous driving, resulting in growing demand for silver-coated or silver-alloy wires that provide high-frequency transmission of big data.

Depletion of Silver inventories in various warehouses. LBMA

The quantity of silver held in London Bullion Market Association (LBMA) vaults now hold less than a billion ounces (997.4Moz or 31,023 tonnes), which is 15.4% lower than a year ago (to end of June), when silver inventories were at 1.18 billion ounces, or 36,707 tonnes. June 2022’s LBMA silver holdings are the lowest silver inventories since December 2016 and the first time since November 2016 that inventories have fallen below 1Boz. Also, there has never before been a seven-month period, or six months, during which LBMA silver stocks fell consistently every month.

International Silver Institute Estimates on Mine production

Global silver mine production is expected to rise 2.5% compared to last year, reaching 843.2 million ounces or 26,226 tons, with the biggest increase likely to come from Mexico. The biggest decline will come from Peru, a loss of 365 tons, mostly due to the suspension of Uchucchacua in the fourth quarter of 2021, to allow Buenaventura to undertake development work aimed at improving the economics of the mine. Also, the Russia-Ukraine conflict led to Kinross suspending operations at its Kupol mine in early March, which produced 3.3Moz (104t) in 2021.

Analysis

COMEX Silver prices have seen steady downside movement since the April of this of the year as it faced resistance near $25-26 range. However the prices are expected to take support near $18-17.5 zone in medium term. Prices can show accumulation near $18-17 and can recover towards $22 in medium term.

Analysis

MCX Silver prices have shown steady downside momentum since the April of the year as it faced resistance near 72000-73000 range. It has strong support zone near 54000-55000 .If it manages to move above 57000 further upside towards 61000-63000 can be seen. Any correction in dollar index will result in fresh buying in this counter.

Disclosure

Globe Capital Market Limited (“GCML”) is a Stock Broker registered with BSE, NSE, USE and MSEI in all the major segments viz. Capital, F & O and CDS segments. GCML is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, GCML is a SEBI registered Portfolio Manager. GCML includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates.

Globe Commodities Limited, Globe Derivatives and Securities Limited & Globe Fincap Limited are subsidiaries of GCML. Rolex Finvest Private Limited, A to Z Consultants Private Limited, A to Z Venture Capital Limited, M. Agarwal Stock Brokers Private Limited, A M Share Brokers Private Limited, Shri Adinath Advertising Company Pvt. Ltd., Orient Landbase Private Limited, Bolt Synthetic Private Limited, Price ponder Private Limited and Lakshya Impex Private Limited are associates of GCML. Globe Comex International DMCC is step down subsidiary of GCML.

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