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Silver: Up as the US yields dip despite hotter than expected US PPI data
Performance:
Spot Silver, once again, found support near $28 mark on May 14, and it survived hotter-than-expected US PPI data (April), too. It was seen trading with a gain of nearly 1.10 per cent at $28.50 at the time of MCX closing. The corresponding MCX July LTP was 85,434, up 0.65 per cent on the day.
Geopolitical watch:
The situation remains tense as Israeli tanks have pushed deeper into Rafah. Qatar has warned that in the present scenario, ceasefire talks are going ‘backwards’. At least 450,000 Palestinians have fled Rafah.
Also Read
ETF holdings and COMEX inventory:
Total known global silver ETF holdings fell for the second straight day to 689.403 Moz on May 13. COMEX silver inventory stood at 297.248 Moz as on May 13.
Data and event round up
US PPI Final demand (April) m-o-m was up 0.50 per cent vs the forecast of 0.30 per cent, PPI ex food and energy M-o-M was also up 0.5 per cent as against the expectation of 0.20 per cent.
PPI ex-food and energy Y-o-Y stood at 2.40 per cent vs the forecast of 2.30 per cent, whereas PPI final demand Y-o-Y at 2.20 per cent, which was in line with the forecast. Bond markets and silver initially fell in immediate reaction to the US data; however, bonds recovered on the notion that some of the elements in the PPI report, which will go into the PCE deflator report, were not hot enough. Moreover, downward revisions to the prior data also mitigated the impact. Powell calling the data ‘mixed’ also supported the bonds; thus, in turn silver.
PPI ex-food and energy Y-o-Y stood at 2.40 per cent vs the forecast of 2.30 per cent, whereas PPI final demand Y-o-Y at 2.20 per cent, which was in line with the forecast. Bond markets and silver initially fell in immediate reaction to the US data; however, bonds recovered on the notion that some of the elements in the PPI report, which will go into the PCE deflator report, were not hot enough. Moreover, downward revisions to the prior data also mitigated the impact. Powell calling the data ‘mixed’ also supported the bonds; thus, in turn silver.
The UK's Office for National Statistics released the UK job report. The report was weaker than expected. As per the report, the ILO Unemployment Rate edged higher to 4.3% in the three months to March from 4.2%. The Claimant Count Change rose 8.9K, while the employment change was down 177K in April, though average earnings rose more than expected.
Yields and Dollar:
The ten-year US yields were down nearly 1 per cent to 4.45 per cent at the time of MCX closing. Consequently, the US Dollar Index slid 0.17 per cent to 105.14 despite hotter than expected US PPI data.
Fedspeak:
The Federal Reserve Chair Powell, in a discussion at the annual general meeting of the Foreign Bankers' Association in Amsterdam on Tuesday, noted that the first quarter was notable for its lack of further progress on inflation. Nonetheless, he said that he was confident of inflation moving towards the Fed’s 2% goal. He called the data ‘mixed’ as prior data were revised lower. His take on the US PPI data lifted bonds, gold and silver as the US Dollar Index fell.
Upcoming US data
The US data on tap on 15 include CPI (April), advance retail sales (April) and NAHB housing Index (May). Traders will scrutinize both CPI inflation and retail sales data critically.
Outlook:
The US Federal Reserve Chair Powell showing confidence that inflation will eventually come down to the Fed’s 2 per cent goal and calling the data as ‘mixed’ is somewhat positive for the metal. The white metal may challenge $29 resistance (Rs 87,000) in the near-term, though robust retail sales data amid high inflation can lead to a sharp correction. Support is seen in the range of $27.90-$28 (Rs 83,600-Rs 83,900).
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Disclaimer: Praveen Singh is an Associate VP of Fundamental Currencies and Commodities at Sharekhan by BNP Paribas. Views are his own.
