 "Trading strategy, July 31: Silver may consolidate gains before Fed outcome")
Silver: Rises on the US bond rally
Performance:
Spot silver was trading at $28.31, up 1.65 per cent on the day, at the time of the MCX closing. MCX September contract at Rs 82,620 was up 1.64 per cent.
The white metal followed the US bonds higher as the US FOMC monetary policy decision looms.
US Yields and the US Dollar Index
The ten-year US yields eased by around 0.89 per cent to 4.14 per cent, while the twos were down by nearly 0.75 per cent to 4.354 per cent. The US Dollar Index slid by 0.05 per cent to 104.52 on softer yields.
Data roundup:
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The JOLTs job openings (June) came in at 81,84,000 versus the estimate of 80,00,000 jobs, though the number of jobs quits decreased to the lowest level since November 2020, which could be seen as a negative point in the report; thus, sending the yields lower. The prior data was revised higher from 81,40,000 to 82,30,000. Conference Board consumer confidence (July) at 100.30 topped the forecast of 99.70, though the prior data of 97.80 was revised lower to 97.80.
Upcoming data:
This week is crucial to the metal as the US ADP, ISM manufacturing and non-farm payroll data are on tap. In addition, focus will be on the Bank of Japan's and the US FOMC monetary policy decisions due on July 31. The Bank of England will deliver its monetary policy decision on August 1.
US FOMC monetary policy decision and the Friday’s US non-farm payroll report will be the most important event and the data for the white metal.
Silver ETF holdings and COMEX Inventory
Total known silver ETF holdings stood at 717.386 Moz as of July 29 as the holdings rose for the second straight week. Silver-backed ETFs have expanded by more than 850 tons month-to-date, the most in more than three years as investors are piling into the metal ahead of the US Fed’s monetary policy decision.
COMEX silver inventory stood at 302.213 MOz as of July 29 at the highest level since October 2022.
Silver Outlook:
Silver is expected to consolidate its gains before the FOMC decision. As the markets have already discounted September rate cut by the Fed, the metal may fall unless the Fed gives clear guidance on possible rate cuts going forward. Weakness in the Chinese economy and slowdown in the green energy transition are negative factors for the metal. In addition, the US non-farm payroll report and ISM PMIs will also be crucial for the metal. Overall, the metal may slide posy-FOMC decision as the Fed is expected to exercise caution in its monetary policy decision. Bears eye $26 level.
Key levels on Silver to watch
Support is at $27.30 (MCX September contract Rs 79,600) /$26 (Rs 75,800). Interim support is at $28.20 (Rs 82,300). Resistance is at $28.50 (Rs 83,200)/$28.70 (Rs 83,700)/$29.50 (Rs 86,000).
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Disclaimer: Praveen Singh is an associate vice president of fundamental currencies and commodities at Sharekhan by BNP Paribas. Views expressed are his own.