 "Trading strategy today: Silver may test support of Rs 76,200 in near-term")
Performance: Lower as the US Dollar Index and yields try to recover
Spot silver, in line with other commodities, has undergone wild movements this week as it has swung between $26.50 and $29.24. The metal fell to $26.50 level on Tuesday as commodities tanked on risk aversion in the wake of a weaker than expected nonfarm payroll report out of the US.
Spot silver was trading at $27.14, down around 0.39 per cent on the day, when the MCX closed. The MCX September contract was changing hands at Rs 79,628, up 0.04 per cent. The spot silver was still down about 5 per cent on the week. It is down approximately 17 per cent from its cycle peak of $32.52 hit in May.
US yields and Dollar:
The US yields and the Dollar Index are trying to recover after huge downward moves this month on disconcerting US monthly employment report (July).
The US Dollar Index at 103 was up around 0.30 per cent, at the MCX closing. It is still down nearly 1.40 per cent from the NFP report day's peak of 104.40.
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The ten-year US yields fell nearly 37 bps this month, after a decline of 37 bps in July, but were recovering as the US ISM services (July) data turned out to be somewhat encouraging.
The ten-year yields were at 3.87 per cent, up around 20 bps from the cycle low. The two-year yields were at 4 per cent, up around 2.51 per cent on the day as the yields recovered from the cycle low of 3.65 per cent.
Data roundup:
The US employers added 114K jobs in July (forecast 175K) as the unemployment rate surged to 4.30 per cent (forecast), highest since October 2021, from 4.10 per cent in July. The two-month payroll net revision stood at -29K. Average hourly earnings M-o-M rose 0.20 per cent (forecast 0.30 per cent), while Y-o-Y earnings growth also slowed to 3.60 per cent (forecast 3.70 per cent) from 3.90 per cent in June.
US ISM services data (July), released on August 5, came in at 51.40 (forecast 51), which halted the bond rally.
Euro-zone retail sales data, released Tuesday, fell 0.30 per cent Y-o-Y in June (forecast +0.10 per cent) and 0.30 per cent M-o-M (forecast -0.10 per cent)
Upcoming data:
This week is a data light week per se. Major focus will be on Thursday's US weekly jobless claims, which have surged to a one-year high. China will release its trade balance and inflation data (July) on Wednesday and Friday respectively
Fedspeak:
Federal Reserve Bank of Chicago President Austan Goolsbee said that the central bank’s job is not to react to one month of weaker labor data. He added that markets are much more volatile than Fed actions.
Federal Reserve Bank of San Francisco President Mary Daly said that July jobs report reflected a lot of temporary layoffs and hurricane effect. In addition, she said that none of the job market indicators she looks at are flashing red presently, but they are monitoring carefully.
ETFs and inventory:
Total global known silver ETF holdings were at 716.571 Moz as of August 5, slightly lower from 717.474 Moz seen at the beginning of the month. It is to be noted that the global Silver ETFs recorded a net inflow of around 850 tonnes in July as investors positioned for a rate cut signal in July FOMC meeting. The COMEX silver inventory stood at 303.804 Moz, highest since October 2022.
Outlook:
Silver has been one of the weakest commodities this month as risk aversion continues to linger. The US yields and the US Dollar Index are expected to recover further on better-than-expected US ISM services data and the Fed officials trying to bring a sense of stability in financial markets.
Silver may test the crucial support around $26 (Rs 76,200) in near term, though medium to long term prospects are bright. Interim support is around $26.50 (Rs 77,700). Resistance is at $27.31 (Rs 80,100) / $27.55 (Rs 80,800) /$28.25 (Rs 83,000).
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Disclaimer: Praveen Singh is Associate VP, Fundamental Currencies and Commodities at Sharekhan by BNP Paribas, Views expressed are personal