Here's how to trade Silver on November 08; Check resistance, support here

Silver: Regains $32 but remains vulnerable 

Performance

  On November 6, spot silver prices sank by around $2 to $30.82 – the lowest since October 15-- as Donald Trump won the US presidential election to become the 47th US president. His economic policies are strongly growth oriented; thus, the US bonds tumbled on concerns about large borrowings which would worsen the fiscal deficit. As he intends to impose heavy tariffs on China, the industrial metals were badly hit, which worsened the sell-off in silver. The US Dollar Index surged to 105.44, the highest since July 3. 

Silver recovered strongly on Thursday on bargain hunting and yields correcting lower in the wake of the US FOMC monetary policy decision. 

 

  Silver closed with a whopping gain of 2.76 per cent at $32. 

  Dollar Index and US yields 

The ten-year surged to 4.48 per cent on November 6, the highest since July 1. However, the US yields slumped on November 7 on expectations from the Fed. The US Dollar Index, which spiked to 105.44, the highest level since July 3, followed the yields lower. 

  Data and event roundup 

The Bank of England, as expected, cut benchmark rates by 25 bps to 4.75 per cent, though the Bank warned on the UK's budget inflation hit and it may not cut rates too quickly unless the economy evolves as expected. It is to be noted the UK plans a Pound 90.40 billion of yearly spending, almost half of which is to be financed through borrowing; thus, bond vigilantes demand higher rates to be compensated.

  The US data released on Thursday showed that the unit cost of labour rose 1.90 per cent (forecast 1 per cent) in the 3Q as the 2Q figure was revised higher to 2.4 per cent from 0.4 per cent. The data complicates the Fed's decision to cut rates in future.

Initial jobless claims came in at 221 K (forecast 222K), around the pre-covid level; however, continuing claims at 1892K were higher than the forecast of 1873K.

  FOMC decision  The Fed cut rates by 25 bps stating that it was in support of its goals. The Fed Chair Powell said in his presser that the US economy was strong and some downside risks seem to have diminished. He cautioned that rate cut was not a signal and they can adjust the rate cut pace. He also mentioned that yields were moving higher in anticipation of stronger growth, not due to inflation expectations. 

Upcoming data 

Today's US data include University of Michigan sentiment (November prel.) and inflation expectations. Traders will closely monitor US CPI and PPI data slated to be released next week.

  India’s silver demand

  The Economic Times, citing data collated by the India Bullion & Jewellers Association (IBJA), reported that Indians bought 220 tonnes of silver during the Dhanteras-Diwali period, the highest in two decades. Sales were 37 per cent higher y-o-y compared to 160 tonnes in 2023. 

  ETF and inventory  Total known global silver ETF holdings slid to 738.595 MOz on November 6, the lowest level since October 22. The COMEX silver inventories surged to 310.913 Moz on November 6, the highest level since October 2022.

  Outlook

The Fed cutting rates despite citing strong growth will put the focus back on inflation. The US bonds are quite volatile. Yields are likely to spike again on growth expectations and deficit concerns. China's National Congress will conclude it's standing committee meeting today. Markets expect strong stimulus to counter the impacts of proposed tariff hikes by  the President elect Trump. A disappointing stimulus decision at the standing committee meeting will weigh heavily on industrial commodities as markets are concerned about the possible impacts of the massive tariff on China. Silver is still vulnerable. Selling into rallies is advisable unless markets find China's stimulus to be good enough. Support is at $31.75/$31/$30.80. Resistance is at $32.50/$33.25.

 

(Disclaimer: Praveen Singh is Associate VP, Fundamental Currencies and Commodities at  Sharekhan by BNP Paribas. Views expressed are his own.)