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IGI Securities Limited – Commodity News

Karachi, January 17, 2018 (PPI-OT): Silver

Technical

The Silver markets continue to be very noisy, and although we broke down rather significantly during the trading session on Tuesday, but then turned around to show signs of bullish pressure again. The market looks likely to continue to be very loud, but I think that the US dollar continues to struggle overall, and that should provide a bit of a boost for silver. Judging by the massive reaction that we have seen over the last several hours, it’s likely that the participants will continue to look at dips as buying opportunities, and perhaps add a bit. I believe that physical silver is probably the best way going forward, as there is much volatility. However, if you choose to use CFD markets, those can help mitigate some of the losses, because at this point, with this type of volatility I would be very leery of trading in actual futures markets, as the contracts can be rather expensive.

Highlights

Silver prices were slightly up and hit a two-month high overnight

The precious metals markets are being supported by a plunging U.S dollar index and a soaring Euro currency

The key outside markets yesterday saw the U.S. dollar index lower and not far above Monday’s 3.5-year low

U.S data released yesterday was light. However, the report pace picks up today

World stock markets were mostly higher boosted by increasing optimism on global economic growth

Fundamentals

Silver prices edged up today, as the U.S. dollar slumped to three-year lows against a basket of currencies. The dollar index was down 0.1 percent at 90.373, after dropping to its lowest since December, 2014 to 90.113.

Most of the move in gold has been dollar denominated. We have seen very little change in ETF holdings. There is very little change in perception of gold in terms of safe haven demand.

The outlook for precious metals in economists view is down due to the lack of physical demand in Asia and the outlook for rate hikes this year is a headwind for gold and silver.

The U.S. Federal Reserve is widely expected to raise interest rates multiple times this year, although at a gradual pace. Gold and Silver are highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Asian stocks stepped back from a record high on Wednesday as the region’s resources shares were dented by falling oil and commodity prices, while digital currencies tumbled on worries about tighter regulation.

While the U.S. dollar remains the most prominent driver of momentum, we cannot overlook the meltdown in Bitcoin on the back of regulatory oversight adding to the gold risk premium.

Digital currencies tumbled, with bitcoin falling to a six-week low of $10,162 after reports said South Korea and China could ban trading, which intensified fears of a wider regulatory crackdown.

Spot silver was mostly unchanged at $17.20 per ounce in today’s session and Spot platinum rose 0.3 percent to $1,002, after touching its highest since Sept.8 at $1,006.60.

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