IGI Securities Limited – Commodity News

Karachi, December 19, 2017 (PPI-OT): Silver

Technical

Silver markets gapped lower initially during the Monday trading session but then rallied significantly to blow through that gap. Because of this, we broke out to the upside, pulled back to the $16 handle, and then continue to go to the upside. I think if we can break above the recent highs, the market should then go to the $16.35 level. Short-term pullbacks offer value, and I believe that longer-term traders are continuing to add to their positions and therefore I think it’s only a matter of time before we rally every time we dip. I think that the market is probably best being traded from a short- term perspective, unless of course you can hang onto physical silver. If we break down below the $15.90 level, the market will continue to drop, but I think in the meantime pullbacks will probably find plenty of buyers between here and there. Longer-term, I think we’re going to go looking towards the $16.50 level.

Highlights

Silver edged up 0.1 percent to $16.06 an ounce in yesterday’s session

Asian stocks advanced today after a record-setting session on Wall Street

Minneapolis Fed Bank President Neel Kashkari said he voted against the Fed’s decision to raise interest rates last week

The rally in precious metals likely due to strong jewellery demand coming from China

Goldman, however, sees a negative six percent return from precious metals in 2018, mainly due to lower gold price estimate

Fundamentals

Silver Gold edged higher as uncertainty over U.S. tax legislation weighed on the dollar, while an analyst said bullion might face renewed headwinds early next year.

The dollar index fell, making bullion denominated in the greenback cheaper for buyers using other currencies, as concerns grew over whether the proposed U.S. tax code overhaul would have a major impact on economic growth.

If the tax bill were to pass, we think the gold price would fall lower. That has to do with stronger growth, more room for the Fed to normalize interest rates. That should create a headwind for investors.

Higher interest rates usually push gold lower because they raise bond yields, reducing the appeal of non-yielding bullion, and boost the dollar, making gold more expensive for holders of other currencies.

If the tax proposal were to fail, there would be some reason to think there’s political risk at that point because it would take the market by surprise, and that would provide some support for precious metals.

Top U.S. Republicans expect Congress to pass the bill this week, with votes in the House of Representatives and Senate as early today. A final bout of dollar strength could hit gold and silver into 2018, but then it should recover.

Silver was up 0.4 percent at $16.12 an ounce after rising to a nearly two-week high of $16.17. Silver investment demand is expected to be virtually flat in 2018, as geopolitical and economic concerns continue to draw buying interest, New York-based CPM Group said yesterday.

Kaskhari has dissented from all three of the U.S. central bank’s decisions to raise interest rates this year and had previously cited inflation as his chief concern.

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