IGI Securities Limited – Commodity News

Karachi, May 24, 2018 (PPI-OT): Silver

Technical

Silver markets broke down rather significantly during the trading session yesterday, as the US dollar showed a lot of strength. There was a lot of headwinds in the currency markets when it came to precious metals, and silver reach down to the $13.30 level, an area that has been important more than once. It will continue to try to find reasons to go higher, and in the viability of the silver rally over the longer-term. Economists think that silver may be helped by non-US denominated markets, as silver will most certainly continue to strengthen against the British pound and the Euro. That has a bit of a knock-on effect over here, but this market will probably rally much lower than the other ones. If it could break above the $16.60 level, the market could very well go much higher. The $16 level underneath is a significant support level, and it is more of a “zone” that extends down to the $15.50 level.

Highlights

Silver prices fell 0.8 percent at $16.39 an ounce as the metal is moving relative to the dollar

The dollar fell after the latest Federal Reserve meeting hinted at a dovish approach to rate hikes later this year

Silver is often seen as a safe investment during times of political and financial uncertainty

A gain in the dollar makes silver more expensive for holders of foreign currency

Market-based measures of inflation compensation remain low, survey-based measures of longer- term inflation expectations are little changed

Fundamentals

Silver prices dithered today after relinquishing the wide gains of yesterday and closing flat, as risk appetite goes through similar stages of volatility. Silver prices last traded at $16.53 an ounce, same as the opening price, with an intraday high at $16.57, and a low at $16.51.

US treasury secretary at first hinted at almost reaching a deal with China to solve the trade dispute, but then President Donald Trump expressed his discontent about the ongoing talks.

Markets await the Federal Reserve’s minutes for the last meeting, at which policymakers held interest rates steady. Investors seek clues about the next step in the Fed’s path towards policy tightening, and to assess the chances of a rate hike in June.

Silver has been under pressure the last few weeks and is now consolidating at lower levels. It appears that the lows are in for now and the next move will be higher. It also has been traded lower, with one being the strength of the U.S. dollar. If that’s the case, it shows that silver was weak as the dollar was collapsing from 103 to 88.

All markets trade in different phases and although there is a direct correlation between commodities and the dollar over time, they are related during different cycles.

Silver prices trimmed daily losses after Federal Reserve’s May meeting minutes signalled a rate hike in June. The minutes showed that most Federal Reserve policymakers viewed another interest rate hike as being warranted soon, if the U.S economic outlook holds up.

Most participants judged that if incoming information broadly confirmed their current economic outlook, it would likely soon be appropriate to take another step in removing policy accommodation.

You May Also Like