IGI Securities Limited – Commodity News

Karachi, April 18, 2018 (PPI-OT): Silver

Technical

The Silver markets were very noisy yesterday, as it continue to see a lot of volatility around the world. The market found support just above the $16.55 level during trading, and then went much higher as market participants got very bullish. The market will continue to see a lot of volatility going forward, as Silver is notoriously volatile anyway. Economists believe that the US dollar will have the usual influence on this market, as the US dollar falling in value will help lift the Silver markets higher. The $16.50 level is going to be a certain amount of support for the market. Buying dips will continue to be buying opportunities, but it would be cautious about putting too much money to work. The $16 level underneath is essentially the “floor” in the market, just as the $17 level above is resistance. If it can break above the $17 level, the market could go to the $17.25 level.

Highlights

Silver futures were up 0.32% to $16.84 a troy ounce

A lack of fundamentals is keeping the precious metal tied tightly to 2018’s range

Higher rates tend to boost the dollar, making greenback-denominated silver more expensive for buyers using other currencies

Trump accused Russia and China of devaluing their currencies while the U.S raises interest rates

The central bank will remain behind the inflation curve, which would keep real interest rates low, supporting silver prices

Fundamentals

Silver rose 0.7 percent to $16.72 per ounce. There is potential for silver prices as the silver ratio is too high, the ratio currently trading at 80.36 points. May silver futures traded at $16.74 an ounce, up 0.38% on the day.

The market has an abundant, liquid above-ground supply that bearish positioning in silver is unstainable. This leaves the market extremely vulnerable to short covering although time could be running out.

Markets are once again focusing upon global growth, U.S equities and the continued trade dispute between the United States and China. These polar opposite factors have created a scenario for silver pricing that is supportive of current pricing, and at the same time is limiting any major upside price moves.

Economists expect inflation prints to remain high and nudge closer to 3% into summer now that a distortion from cell phone data pricing drops out of annual comparisons, as well as support from a weaker dollar.

The market is increasingly skewed to the upside but it will need to be nudged into taking outright positions through an initial breakout in prices. Along with higher inflation, ING is also bullish on silver as analysts see market volatility rising because of ongoing geopolitical turmoil.

U.S equities continuing to make their dramatic ascent indicates a market sentiment that favours the risk-on asset class, as well as a modestly higher U.S dollar. Although concerns still exist in regards to recent geopolitical events such as the military action in Syria, these concerns have become minimized.

A sharp silver ratio reversal will likely take out the silver shorts before the funds show further fatigue. The metals market also saw good news from major metals importer China, with the nation’s annual economic growth coming in at 6.8% in the first quarter, which was slightly higher than expected and on pace with 2017 gross domestic product growth rate.

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