IGI Securities Limited – Commodity News

Karachi, January 02, 2019 (PPI-OT): Silver

Technical

Silver markets rallied a bit but found the $15.50 level to be resistive enough. Silver markets rallied on New Year’s Eve to break above the $50.50 level. However, it did run into a bit of resistance and therefore turned around of form a bit of a shooting star. This suggests that it may get a bit of a pullback as nice opportunity. The 50 day EMA underneath there is turning higher, which of course signifies longer-term strength. A pullback is healthy though, because it has gone straight up over the last several days. The alternate scenario of course is to break above the top of the shooting star which is a very bullish sign and would be a buy signal. The US dollar has softened a bit due to the reluctance of the Federal Reserve to continue its hawkish stance, so stronger Silver pricing makes sense. The $16 level based upon the $1.00 consolidation area that had been in previously.

Highlights

Silver prices were down 0.5 percent to $15.36 an ounce

The financial markets are not looking for any rate hikes by the Federal Reserve in 2019

Investors are looking for an alternative investment away from stocks and bonds

The March U.S dollar index was down 0.205 point to 95.760

March silver was up 10.9 cents to $15.545 and traded as high as $15.575, its strongest level since August

Fundamentals

Silver futures slipped from late July highs for another session as the dollar index traded near October 22 lows, ahead of US manufacturing data later today. Silver futures due in March fell 0.58% to $15.45 an ounce, while the dollar index added 0.02% to 96.17.

If interest rates are not going to go up as much as expected, that is going to weigh on the dollar. And if US growth slows, that will weigh on the dollar too. It is not expected the dollar to decline sharply, but these factors will be key headwinds for the US currency.

Profit-taking at existing levels and fresh losses in the white metal overseas, mainly pulled down silver prices in futures trade here. Globally, in the international market, silver traded 0.12 percent up.

No major U.S economic reports are on the calendar but will be later in the week after investors come back from the New Year’s holiday. The Institute for Supply Management’s manufacturing survey is scheduled for release on tomorrow and the U.S jobs report on Friday.

Strong economic reports tend to increase expectations for rate hikes, thus boost the dollar and undercut silver due to the strong inverse relationship between the two markets and vice-versa. One of the exceptions is weak inflation data since this reduces the possibility of rate hikes.

Now investors await the final reading for the US manufacturing PMI by Markit, estimated at 53.9, same as the first reading and down from 55.3 in November. While a US partial government shutdown has entered its second week as President Donald Trump and the Democratic Party fail to reach a compromise on funding for the border wall with Mexico.