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IGI Securities Limited – Commodity News

Karachi, January 11, 2018 (PPI-OT): Silver

Technical

Silver markets gapped lower at the open on Wednesday, drifting down towards the $16.90 level, but we had seen quite a bit of bullish pressure, breaking above the $17 level rather handily as the Americans came aboard. I believe that we will probably see a short-term pullback, but that should offer value for traders to get involved in. I think that the $16.90 level underneath offers significant support, and I think that we will eventually go to the $17.25 level above, which has been massively resistive of the last couple of weeks. Eventually, we should break above there, and continue to go much higher, with the first target being the $17.50 level. If we were to break down below the $16.90 level, the market probably goes down to the $16.75 level after that, which has been supportive, and that being the case it’s likely that we will find buyers underneath.

Highlights

Silver prices were up 0.2 percent at $17.10 an ounce today

Officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries

The greenback posted its biggest single-day drop yesterday against the Japanese yen in nearly eight months

Silver and gold prices fuelled by the weak dollar after the China news came out

The Bank of Japan moved to trim its long-dated government bond purchases earlier in this week

Fundamentals

Spot silver rose 0.2 percent to $17.01 an ounce. Prices fell to the lowest in nearly two weeks at $16.86 yesterday. The stage may be set for commodities to extend their stellar gains.

Metals, has been constructive on gold over the $1,300 level, but wants to see the yellow metal move higher before he becomes bullish on the momentum. The main catalyst behind gold’s rally Wednesday was news that China may be backing away from U.S. Treasury bond buying.

Chinese officials had recommended slowing or halting U.S. Treasury purchases sparked a broad-based sell-off of the dollar, lifting assets priced in the U.S. currency.

The dollar, already under pressure versus the Japanese Yen after the Bank of Japan moved to trim its long-dated government bond purchases earlier this week, slid 0.6 percent versus a currency basket, its biggest one-day drop in a month.

U.S Treasury yields are continuing to rise – that should be a headwind for precious metals, but it seems to be ignored after the news late morning. It all comes down to the weak dollar.

The U.S. currency slumped on Wednesday after a report that China was reconsidering its stance on U.S. treasury purchases, with the greenback posting its biggest single-day drop against the Japanese yen in nearly eight months.

Officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, Bloomberg News reported. Major government bond yields hit multi-month highs on Wednesday as investors re-evaluated the likelihood of continued easy-money policies by the world’s major central banks following the BoJ move.

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