Silver prices remain vulnerable amid weakness in industrial commodities | commodities

VaselineAugust 14, 2024

0 3 minutes read

4 minutes to read Last update: August 14, 2024 | 8:47 AM IST

Spot silver was trading down about 1 percent at $27.72 at the close on MCX. Silver fell despite a sharp drop in US yields and a weaker US dollar. The MCX September silver contract at Rs 81,110 (LTP) was down about 0.55%. Silver’s weakness could be attributed to weakness in external markets, particularly industrial commodities. Most commodities fell despite weaker-than-expected US PPI (July) data.

Data Brief: US PPI is much weaker than expected

US PPI rose at a slower-than-expected pace in July as the cost of services fell for the first time this year. The PPI for final demand (July) rose 0.10 percent versus the 0.20 percent increase forecast. PPI ex food and energy was unchanged (+0.20 percent forecast) in July, which is the slowest pace since March. Service costs fell by 0.20 percent; however, commodity prices rose 0.60 percent, the most since February. Ex PPI data on food and energy rose 2.40 percent y/y (forecast 2.60 percent), compared with 3 percent in June. PPI final demand rose 2.20 percent year-on-year (forecast 2.30 percent). However, PPI ex food, energy and trade at 0.30 percent mom was hotter than the estimate of 0.20 percent. Similarly, the ex-food, energy and trade PPI at 3.30 percent was also hotter than the estimate from the previous year.

Britain’s monthly jobs report for June was mixed as the jobless rate fell from 4.40% in June to 4.20% in July (expected 4.0%), although jobless claims rose to 135,000 in July from 36.20 in June. Eurozone ZEW survey expectations (August) came in at 19.20, which was behind the forecast of 34.

US yields and dollar index: US 2-year yields return below 4%.

The US dollar index and yields tumbled on weaker-than-expected US PPI data (July). U.S. 10-year yields fell 1.29 percent to 3.86 percent, based on largely cut U.S. PPI data. US two-year yields rebounded 4% as yields fell more than 1.50% to 3.96%. As a result, the US dollar index fell 0.40 percent to 102.72, its lowest since Aug. 5. The improvement in risk appetite also weighed on the US dollar index.

ETFs and Stocks: Mixed

Total known silver ETF holdings rose to 717.172 MOz on August 12 from 716.497 MOz on August 9. Meanwhile, COMEX silver stock rose to 303.34 MOz on August 12 from 302.400 MOz on August 9; thus, COMEX inventory continues to hover around July 2022 high.

Upcoming dates: Crucial US CPI data

Today’s US data includes the crucial CPI inflation (July). UK CPI data (July) will also be released today. Eurozone second-quarter GDP growth, employment and industrial production data will also be on deck today.

The UK’s second-quarter GDP growth rate and China’s retail sales, industrial production and house prices data will be released on August 15. US retail sales advance (July), import price index, industrial capacity and weekly jobless claims data will be released on August 15. .

Outlook

Silver continues to lag behind gold as investors worry about the global economy, particularly the Chinese and US economies. The gold/silver ratio rose sharply from around 72 seen in a few days to around 90. Silver tracks industrial commodities more than gold. So silver may continue to remain under pressure if industrial commodities are weak. However, investors are expected to buy dips in the metal ahead of US CPI data and the August 22-24 Jackson Hole Symposium.

Extreme volatility is expected in the gauge for US CPI and retail sales data. Indian traders need to be cautious as US retail sales data will be released in August, a bank holiday for Indian stock markets.

Support is $27.22 (MCX September silver contract Rs 79,600)/$26.45 (Rs 77,400) / $26.15 (Rs 76,500). Resistance is at $28.31 (Rs82,800) / $28.41 (Rs83,100) / $28.84 (Rs84,400) / $29.32 (Rs85,800).

Disclaimer: Praveen Singh is Associate Vice President of Currencies and Fundamental Commodities at Sharekhan by BNP Paribas. The opinions expressed are his own.

First publication: August 14, 2024 | 8:47 AM IST

VaselineAugust 14, 2024

0 3 minutes read

Vaseline

Related Articles

Get ready! Intel shares hit 10-year low, worst day on Wall Street in half a century

4 REIT stocks holding buys in September

California woman who lost her job after talking to auditors wins $8.7 million whistleblower case

H&M: Keeping faith in earnings