IGI Securities Limited – Commodity News

Karachi, June 20, 2018 (PPI-OT): Silver

Technical

Silver markets have been hammered yesterday as it continue to worry about trade tariffs between the United States and China, and an escalation of the potential trade war. Silver of course is greatly influenced by the US dollar as the commodity is bought in that currency, and the US dollar has of course been gaining value in a bit of a fear trade. The market will continue to be very noisy overall, but it anticipate that if it can break above the $16.60 level, then silver will start to rally and recuperate some of the recent losses. Until then, the market is likely to be more of a “sell the rallies” type of situation for short-term traders. Market participants are probably best served buying physical silver, or at least a small CFD position. Futures markets could work, but they tend to be a lot more dangerous in these types of environments. Above $16.60, it would have more faith in larger move.

Highlights

Silver prices are modestly lower and hit a four- week low today

Considering the U.S dollar strength, silver’s rise is looking limited

A stronger U.S currency is likely to act as a headwind for silver prices

The U.S dollar index, which tracks the greenback against a basket of currencies, was up 0.11% to 94.75

Silver rose yesterday, 0.4 percent to $16.34 an ounce. In the previous session, it hit $16.21, its lowest since May 16

Fundamentals

Silver prices are moderately lower in early U.S trading yesterday, with gold slumping to a six-month low, as major raw commodity markets are selling off amid fears of a major world trade war.

Silver futures due on July 15 fell 0.58% to $16.340 an ounce from the opening of $16.44, marking May 16 lows, while the dollar index rose 0.29% to 95.03 from the opening of 94.76.

World stock markets were solidly lower overnight and U.S stock indexes are pointed toward sharply lower openings when the New York day session begins. Risk aversion is high today after the Trump administration has threatened China with still more trade tariffs, and China has again responded with its own latest threats. The world’s two largest economies appear headed for a full-blown trade war.

Silver futures fell in American trade away from April 19 highs for the fourth session as the dollar index hit July 17 highs, following earlier data from the US, the world’s biggest economy.

Adding to downside pressure on the precious metals is a surging U.S dollar index that hit an 11-month high today. July Comex silver was last down $0.20 at $16.24 an ounce.

Silver have once again opted to trade in line with the raw commodity sector, instead of as safe-haven assets. Earlier US data showed building permits fell to an annualized 1.30 million units in May from April’s 1.36 million, revised from 1.35 million, and missing forecasts of 1.35 million

US housing starts rose to an annualized 1.35 million units in May from 1.29 million, beating forecasts of 1.31 million, as markets now await Federal Chair Jerome Powell’s speech at the ECB Forum on Central Banking, in Portugal.

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