Overview

White metal silver has seen swift recovery in this month after trading lower in past few months as decline in greenback and increase in industrial demand assisted its prices higher. Silver prices jumped nearly 8 percent in MCX after testing low of 67500 in middle of last month as its prices jumped higher above 76500 recently in MCX. Sharp decline in greenback was witnessed after it moved below 100. Federal Reserve Chair Jerome Powell said most of the central bank’s policymakers expect they would need to raise interest rates at least twice more by year-end with U.S. inflation well above the 2% goal and a labor market that’s still very tight. U.S. consumer spending stagnated in May, while the Fed’s preferred core PCE price index, excluding food and energy, increased 4.6% on a year-on-year basis in May after advancing 4.7% in April. Investors see an 84% chance of a 25-basis-point hike in July, according to CME’s Fedwatch tool, pricing in another 25 bps rate hike in November, bringing rates into the 5.5%-5.75% range before cuts are seen in 2024.Meanwhile the balance between demand-supply would be a significant driver for prices. As per the Silver Institute data, global silver demand outpaces supply. Silver demand has increased by 38% since 2020 while mine production recorded a shortfall.

Factors impacting Silver prices

Movement in Dollar index:

The dollar index which was around 104 at the start of June dropped below the key100 mark recently. The dollar index which measures the US dollar against a basket of currencies is in a downturn after it recently slipped to its lowest level in 15-months, even breaking below the psychological mark of 100. Cooling US inflation and growing expectations of a possible end to the Federal Reserve’s rate hike campaign has triggered a consistent moderation in the dollar index. In medium term dollar index can move in range of 98-102.

Fed interest rates

The U.S. Federal Reserve will raise its benchmark overnight interest rate by 25 basis points to the 5.25%-5.50% range on July 26. A resilient economy and historically low unemployment well over a year since the Fed began one of its most aggressive rate hiking campaigns in history. The underlying inflation has remained sticky and Fed Chair Jerome Powell and other central bank officials have said more tightening is coming, even though they decided to pause the rate hikes at last month’s policy meeting.

Surge in industrial demand of silver

The boost in silver largely comes from the industrial demand, especially from China. Though both gold and silver are considered safe-haven assets, silver is more of an industrial metal recently. Almost 60 per cent of global consumption of silver is accounted for industrial usage and the rest is for investment purposes. Silver has been a valuable commodity for centuries, prized for its beauty, durability, and versatility. It has been used in coins, jewellery, and various industrial applications such as electronics, medicine, and photography. However, in recent years, new demand areas for silver have emerged driven by advances in technology and changes in consumer behavior. Silver is currently largely used in the areas of renewable energy such as solar and wind power. As per Silver Institute data, silver demand from the photovoltaic sector climbed 15 percent last year and is likely to surge 28 percent this year. Silver demand from this sector has been three times higher than its 2015 levels.

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. The global shift towards electric vehicles is another significant driver of silver consumption. The commodity is used in the production of EV batteries and the production of electrical contacts and switches which are essential components of electric vehicles.

Weekly Chart of Silver (COMEX)

Analysis

COMEX Silver prices have seen steady upside movement since the beginning of July as it took key support near $22-21.5 range. Prices are above 10 and 20 day and 50 day moving average. Prices can take support near $20-19.5 and resistance near $27.5-28.

Weekly Chart of Silver (MCX)

Analysis

Silver prices in MCX have seen steady upside movement since the beginning of July as it took key support near 65000-66000 range and hovering near 75000 levels at present. Its prices can face resistance near 78500-79000 range and can see profit booking at higher levels towards 68000 -65000 as dollar index can witness some short covering towards 102 levels in near term. Overall 65000-79500 can be the range for silver.

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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