IGI Securities Limited – Commodity News

Karachi, June 21, 2018 (PPI-OT): Silver

Technical

Silver markets have been very quiet over the last couple of days and are currently dancing around the $16.25 level. Silver is highly sensitive to risk appetite and of course the US dollar, so if the US dollar were to rally like it did on Thursday of last week, it’s likely that silver will fall. At this point, it look at the $16.50 level above is a bit of resistance, and if it can clear the $16.60 level, this is a very strong sign, and it should continue to go to the $17 level after that. In the short term, the $16.25 level should offer plenty of support, and at this point the market breaking down below there could open the door to the $16 level underneath. That’s a large, round, psychologically significant number, and an area that would attract a lot of attention as it has in the past. Longer-term, it anticipate that this market will go looking towards the $20 level, but it don’t have the catalyst currently.

Highlights

Silver fell 0.5 percent to $16.18 an ounce, having earlier touched its lowest since early May at $16.16

U.S President said that it is expected to announce new trade deals with certain unspecified countries

Long-term Treasury yields also recovered from three-week lows yesterday, supporting the dollar’s rise

It is expected that silver to enjoy more pronounced gains relative to gold

July Comex silver was last down $0.008 at $16.315 an ounce

Fundamentals

Silver prices tilted lower as the dollar index traded flat near July 17 highs, following earlier data from the US, the world’s largest economy. Silver futures due on July 15 fell 0.08% to $16.310 an ounce from the opening of $16.320, while the dollar index traded flat at 95.00 near one-year highs.

Silver prices are slightly lower and hit a four-week low. The near-term technical postures for metal have deteriorated the past week, which is inviting the chart- based sellers into the futures markets.

The safe-haven silver market can’t hold a bid despite some risk aversion seen in the marketplace this week, due to worries about a global trade war. It seems the specter of less global commerce in raw commodities if a trade war would break out is trumping safe-haven buying.

A strong U.S dollar is also working against the precious metals markets. The U.S dollar index hit another 11-month high overnight. Since silver is priced in U.S dollars on most world markets, any appreciation of the greenback makes the metal more expensive to purchase in non-U.S currency.

Another issue affecting sentiment towards precious metal in general relates to the performance of U.S equities. Although the stock market has faltered in recent months, with little apparent positive reaction to what was an exceptionally strong corporate earnings season in the U.S.

Silver has also been impacted by an increasing correlation with industrial base metals, with the latter stalling. For the coming months, therefore, the silver price will still face major challenges.

Later this year though, as U.S economic growth starts to falter, investors will increasingly believe that equities have plateaued. Many investors still view this as a pause, before equities resume their upward momentum.

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