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IGI Securities Limited – Commodity News

Karachi, January 09, 2018 (PPI-OT): Silver

Technical

Silver markets rolled over during the trading session on Monday as the US dollar gained in strength. It might be a bit of a short-term phenomenon though, as the $17 level should offer support. I believe that this market is eventually going to find reasons to go higher, as a break above the $17 level was of course important. Even if we break down below there, there is a gap that extends down to the $16.90 level, so it’s not until we break down below there that I am concerned about the bullishness of silver. I suspect that at the first sign of a bounce, traders will come back in and push silver towards the $17.25 level above, which has been resistance. I think given enough time, we will break above there and go looking towards the $17.50 level. Longer-term, I think we go even farther, perhaps to the $18 level and beyond. I believe in the strength of silver longer-term.

Highlights

Silver prices were trading on a flat note on account of subdued demand for the precious metal from jewellers, retailers and investors

The U.S dollar hit a more than one-week high against a basket of other major currencies yesterday

Investors are betting on further U.S interest rate hikes

Spot silver prices fell 0.3 percent to $17.08 an ounce

The market seems to be getting used to the rate hike expectations

Fundamentals

Silver prices were ending the U.S. day session modestly weaker Monday. Some profit-taking and chart consolidation were featured in both metals, after recent good gains.

A higher U.S. dollar index on this day also worked against the precious metals market bulls. February Comex gold was last down $2.30 an ounce at $1,320.10. March Comex silver was last down $0.135 at $17.15 an ounce.

U.S. stock indexes were higher and hit new record highs yesterday, which was also a negative for the competing asset class, precious metals. There were no major news developments yesterday or over the weekend to significantly impact the marketplace.

The US December non-farm payrolls report on Friday was weaker than expected, but investors reckoned the US Federal Reserve would still raise interest rates multiple times this year, although at a gradual pace.

Gold and silver prices are highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

The dollar’s index against a basket of six major currencies rose 0.2 percent to 92.155 on Monday, up from its Jan. 2 low of 91.751, which was its weakest level since Sept. 20.

The precious metal price in global and domestic markets stood flat on insignificant demand from investors and hedgers. Gold and silver Futures speculation and short term buying kept prices away from any fall.

The trading activity in physical all over on a globe remained future-speculation based as market players remained busy in paper work on inventories for future dealings.

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