Silver may top Rs 1,00,000 on MCX; buy the dips: Praveen Singh of Sharekhan

Silver price on MCX: Support is seen at $31 (Rs 93,500) /$29.50 (Rs 89,000)

Silver: At 11-year high

Performance:

Silver price has risen sharply after the metal took out the psychologically crucial resistance of $30 on May 17. The metal gained momentum to surge to 11-year high as it hit the cyclical high of $32.50 on May 20. It tested this level again on May 21, though could not breach it. Lack of any major US data has also been instrumental in fuelling silver rally. 

Silver continues to be highly volatile as it surged nearly 10% from the low of $29.68 on May 17.   

At the time of the domestic exchange closing, silver traded at Rs 94,700 (MCX July contract), down 0.60%. The corresponding COMEX spot price was $31.88. 

 

Geopolitical watch:

Geopolitical backdrop continues to be supportive for the metal on multiple fronts. Russia has begun its nuclear drill near Ukrainian border, a manoeuvre ostensibly in response to the Western threats. War continues to rage on in the Middle East. Sino-US trade friction is also lending a helping hand to the silver bulls.   

ETF holdings and COMEX inventory:

Total known global silver ETF holdings were up for the second straight day on May 20 and stood at 694.212 Moz as on May 20. COMEX silver inventory was up for the second consecutive day on May 20 and stood at 298.386 Moz.

Data and event round up

There were no major US macro-economic releases in the first two days of the week.

Yields and Dollar:

The ten-year US yields at 4.41 per cent were down by nearly 0.59 per cent as the US Dollar Index traded with a minor gain of 0.10 per cent at 104.67. The two-year US bond yields were down by nearly 0.50 per cent at the time of the MCX closing.

Fedspeak: Mostly neutral

In absence of any major macroeconomic releases, traders' focus was mainly on the Federal Reserve speakers for their views on the Fed's monetary policy. The Fed officials are willing to give more time to the Fed's policy on curbing inflationary pressure; however, this seemingly restrictive policy is being treated as mostly dovish by traders as inflation remains sticky.

Fed Vice Chair for Supervision Barr said that Q1 inflation was disappointing and called for a higher for longer rate regime. Fed's Bostic said that inflation is likely to fall this year, but he cautioned that the is Fed open to all possibilities. Fed's Daly was not yet confident on inflation, though she does not see any evidence of a need to raise rates. Fed's Jefferson called the policy rate to be restrictive territory. Cleveland Fed President Loretta Mester said the central bank officials needed to wait for gaining more confidence on inflation before cutting interest rates.

India’s silver imports

India imported 3,730 tons of silver in Q1 2024, which exceeds the volume imported in entire 2023.

Upcoming US data

The US data on tap tomorrow includes existing home sales. The UK’s CPI inflation data will also be in focus. However, major focus is going to be on the FOMC’s May meeting minutes to be released on May 22. 

Outlook:

China's silver futures priced in Yuan, which began trading in 2012, has already reached record high as it surged 6 per cent on May 21. Further boosting the appeal of the white metal is the fact that Shanghai inventory is running low.

India's silver imports and strong performance by the industrial metals are supportive for the white metal. At the same time, it is worth noting that commodities, particularly metals, have become highly volatile; thus, a proper risk management is must.

Overall, the metal is expected to reach $34.50-$35.50 (Rs 105,000 on the MCX) level in the coming months. Support is seen at $31 (Rs 93,500) /$29.50 (Rs 89,000). Immediate resistance is at $32.50. Buying the dips remains the preferred strategy.  

=============================
Disclaimer: Praveen Singh is Associate VP, Fundamental Currencies and Commodities at Sharekhan by BNP Paribas. Views expressed are personal.