IGI Securities Limited – Commodity News

Karachi, June 19, 2018 (PPI-OT): Silver

Technical

The Silver market has been very choppy during the trading session yesterday, using the $60.50 level as support. The level of course is important from a psychological standpoint, but also from a structural standpoint the rectangle drawn on the chart shows that there is a lot of order flow in this general vicinity. It is because of this that the Silver markets will be able to rally if it don’t get some type of major trade war escalation, or the US dollar escalating in value. If it can break above the $16.61 level, the market will probably continue to try to recover those losses. It could go as high as $17.25 after that. However, it’s not can it be an easy trade. If it break down below the $16.30 level, that will more than likely send the market down to the $16 level next, perhaps even lower. However, there is so much in the way of support below that the downside is somewhat limited in general.

Highlights

Silver prices were unchanged at $16.40 an ounce, after earlier hitting the lowest since June 5 at $16.34

Silver was hit significantly harder than gold on Friday, losing 3.5% by close of trading

Silver prices at present levels are a longer-term, value-buying opportunity

The next CFTC report could show a scale-back in the hedge funds’ bullish posture, as silver futures tumbled Friday

Silver specs aggressively increased their length heading into the FOMC meeting last week

Fundamentals

Silver prices climbed for the third straight session to near two-month highs as Asian stocks wavered today, lending some liquidity to the white metal. Silver prices rose to $17.17 an ounce from the opening of $17.14, with a session- high at $17.21, and a low at $17.10.

Caution remains in the market as US is expected to announce $50 billion tariffs on Chinese imports, rekindling trade war fears. Dollar rose to seven-month highs against a basket of major rivals, as the euro tumbled following the ECB’s meeting, in turn shaving some of silver’s gains.

The July silver was at $16.59 in early New York trading yesterday, meaning they now are down from where they were as of the last Tuesday cutoff for the CFTC data.

Silver has shed almost all of the gains it had accrued since the start of the month. Because the price rise beforehand had been driven to a large extent by speculation as its net-long positions were increased nine-fold to just shy of 41,000 contracts in the space of a week, there was considerable downside potential here.

The CFTC’s “disaggregated” report showed that money managers then upped hiked their net-long position in silver futures to 40,744 lots in the week to June 12 from 4,619 the week before.

Despite the highly expected rate hike, along with stronger jobs and wage data, anticipation that the Fed would imply a dovish tone at the meeting prompted shorts to aggressively cover.

If silver futures prices can push above the trading range seen on the weekly chart, meaning above chart resistance at $18.65, then the bulls would be off to the races to enjoy much bigger upside price potential.

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