IGI Securities Limited – Commodity News

Karachi, December 11, 2017 (PPI-OT): Silver

Technical

Silver markets continue to be very noisy, capping lower at the open of the week, but then turned around to fill that gap as the $16.50 level offered far too much in the way of resistance. By finding that resistance, we turned around to break down significantly, and we ended up below the $16 level later, which is a very negative sign. Currently, we are testing the $15.75 region, the beginning of significant support, as seen based upon the bodies of larger candles. I think there is even more support near the $15 handle, so I don’t have any interest in shorting this market beyond there. Currently, I believe it’s probably best to wait for a supportive candle that we can take advantage of, as Silver should start to look relatively cheap in this region. The US dollar has rallied a bit as of late, as interest rates are likely to be bullish in America, and that could continue to make this a very choppy scenario.

Highlights

Silver prices was down 0.1 percent today in Asian session at $15.82

The dollar was steady in early Asian trade, buoyed by stronger U.S jobs data

U.S employment data on Friday showed jobs increased in November, painting a portrait of a healthy economy

Expectations for a rate hike at this week’s FOMC meeting weighed on investor appetite for precious metals

The Federal Reserve is widely expected to raise benchmark interest rates

Fundamentals

Silver prices ticked up amid a softer dollar today, but lacked impetus to push higher weighed by expectations of an increase in interest rates in the United States.

The dollar gave up some early gains today, but losses were limited as stronger- than-expected U.S. jobs data and expectations of higher interest rates in the United States provided underlying support.

U.S. employment data on Friday showed jobs increased in November, painting a portrait of a healthy economy that analysts say does not require the kind of fiscal stimulus that President Donald Trump is proposing, even though wage gains remain moderate.

Expectations this week are that bullion will hold a narrow range into Wednesday’s FOMC rates decision, while following Friday’s stronger than expected U.S. jobs data we see a 90 percent chance that interest rates will be raised, with the potential that silver may extend recent weakness.

The Federal Reserve is widely expected to raise benchmark interest rates at its two-day policy meeting starting on Tuesday, and provide outlook on further rate hikes next year.

Higher U.S. rates tend to boost the dollar and push bond yields up, putting pressure on greenback-denominated, non-yielding silver. Precious metals will remain under further modest pressure. However, any decline is expected to be modest as the rate rise is largely anticipated.

The United States, Japan and South Korea will hold two days of missile tracking drills starting on Monday, Japan’s Maritime Self-Defence Force said, as tensions rise in the region over North Korea’s fast-developing weapons programmes. Hedge funds and money managers sharply reduced their net long positions in COMEX silver contracts in the week to Dec. 5, U.S. data showed on Friday.

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