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 prices dipped below 52000 in MCX and below $17.6 in COMEX thereby falling nearly 29 per cent from its highs. But prices recovered and stabilized in past two months as some recovery in base metals and yellow metal gold helped in its recovery. Sharp decline in greenback was witnessed recently after it tested Above 114 in last week of September. Meanwhile softening CPI data in US pushed dollar index further lower as it fell more than 6 per cent thereby assisting silver prices.

Factors impacting Silver prices

Movement in Dollar index:

Dollar index after witnessing strong bullish momentum tested 20 year high above 114 in last week of September 2022. The decline in dollar index lifted the bullion counter and silver jumped nearly 25 percent from its lows of nearly 51800 in MCX and $17.3 in COMEX. In medium term any further 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. US Federal Reserve announced its fourth consecutive 75 basis point interest rate hike, which brought the benchmark federal funds rate to the range of 3.75% to 4% in Nov meeting. The announcement by Fed chair Jerome Powell acknowledged the rate hikes’ effects on the economy such as decreased consumer spending, business investment, home prices, and economic output. That could mean the central bank raises its interest rate by 50 basis points in the next meeting in December.

Surge in Indian physical demand

Silver consumption in India is seeing a rebound in 2022 and is having an impact on its price. Local purchases in India were approximately 4,500 tonnes last year, but may exceed 8,000 tonnes this year. Last year, imports remained low, notably for bars and other unwrought metal. This year, implied bar demand is expected to return to 2018 levels. According to the most recent trade data, imports of all types of silver are reverting to more normal levels following the major disruption caused by COVID in 2020-21. Prior to the epidemic, India imported 5,700 tonnes of silver per year on average (since 2012). Imports of all types of silver totalled 5,970 tonnes in 2019, but decreased by 63% to 2,220 tonnes after lockdowns and limitations were enacted in 2020. The lifting of lockdowns in India, as well as the introduction of domestic silver-backed ETFs, has resulted in a significant resurgence in demand. According to August import figures, domestic silver jewellery manufacturing may be increasing. Semi-manufactured silver import volumes are 7.5 times higher than pre-pandemic levels, accounting for 47 percent of overall imports year to year, compared to just 7 percent in 2019.

Decline in LBMA holdings

Silver holdings in London vaults fell to 27,101 tons at the end of September, the lowest since records began in 2016, according to the LBMA.

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.

Weekly Chart of Silver (COMEX)

Analysis

COMEX Silver prices have seen steady upside movement since the beginning of October as it took key support near $17.90-18 range. Prices are above 10 and 20 day moving average and RSI also above 57 indicating strength. Prices are key support near $19.5-20.5 and resistance near $24-25

Weekly Chart of Silver (MCX)

Analysis

MCX Silver prices have seen steady upside movement since the beginning of October as it took key support near 52000-52500 range and hovering near 62000 levels at present. If prices witness some correction from current levels towards 58500-60000 range buying on dips can be seen for higher levels of 65000-68000 in medium term.

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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