Silver- Consolidation ahead of key US data
On June 2, spot silver staged its sharpest intra-day rally since 2021 as it surged 5.39 per cent to close at $34.76, the highest daily closing level since October 22.
The white metal consolidated its gains on June 3 as the US dollar index strengthened. At the time of writing, spot silver was trading at $34.54, down around 0.63 per cent on the day. The MCX July contract was trading at ₹102,260, up around 0.2 per cent.
US-China tensions escalate:
On June 2, China accused the US of violating the US-China trade truce as the US imposed further chip technology curbs and halted the export of critical US jet engine parts and technology to China. It also plans to broaden restrictions on China’s tech sector with new regulations to capture subsidiaries of companies under US curbs. The US also intends to revoke visas for Chinese students with connections to China’s Communist Party and security issues.
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According to the White House, US President Trump and Chinese President Xi are likely to speak this week.
Data roundup:
US data released on June 3, were mostly mixed, markets gave more weightage to the JOLTs job openings though.
Factory order (April) came in at -3.7 per cent against the forecast of -3.2 per cent as the prior data was revised lower from 4.3 per cent to 3.4 per cent. Durable goods order (April final) at -6.3 per cent were in line with the forecast. JOLTs job openings (April) surprisingly beat the forecast as openings rose from 72,00,000 to 73,91,000 as against the forecast of 71,00,000. However, the internals of the JOLTs report was not so encouraging as layoffs increased from 1 per cent to 1.1 per cent and the quits rate dropped from 2.1 per cent to 2 per cent indicating reduced prospects of finding a new job. In addition, vacancies in industries like manufacturing and food services declined.
The Euro-zone's inflation cooled more than expected as consumer prices rose 1.9 per cent year-on-year (Y-o-Y) in May, trailing the forecast of 2 per cent; the reading was cooler than the prior data of 2.2 per cent.
The data bolsters the case for the ECB cutting its key rates by 25 bps in its monetary policy meeting to be held on June 5. Elsewhere, China's Caixin manufacturing PMI (May) fell to 48.3, the lowest since September 2022, from 50.40 in April as trade frictions weighed on the nation's manufacturing sector.
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US dollar index and yields:
The US dollar index, at the time of writing, was 99.24, up around 0.60 per cent on the day, as the Index recovered from a six-week low ahead of the US ISM services and nonfarm payroll reports. US 10-year yields at 4.46 per cent were up by nearly 0.50 per cent
OECD's warning:
The OECD slashed its global economic forecasts on trade war leading to uncertainty on business confidence and investment.
The organisation sees global economic growth at 2.9 per cent in 2025 from its earlier forecast of 3.1 per cent made in March as the US growth is expected to be 1.6 per cent as compared to its earlier estimate of 2.2 per cent. The OECD forecasts a global growth of 2.9 per cent in 2026, down from the previous forecast of 3 per cent.
The organisation warned that fiscal risks are intensifying around the world with tremendous pressure for spending on defence, climate and aging population.
ETF:
Total known global ETF silver holdings, as of May 2, stood at 741.23MOz—highest since 20 November 2024. Silver ETF holdings are up by 4.95 per cent this year as holdings recorded net inflows for four straight weeks.
Robert Kiyosaki on Silver:
According to the Rich Dad Poor Dad author, silver has the potential to triple in value, calling the asset the biggest bargain of 2025.
Outlook:
As risk appetite is healthy and silver ETF holdings are rising, silver is likely to do well unless the US dollar rises sharply, or extreme risk aversion takes center stage. In this scenario, it is advisable to ‘buy the dips’ as the metal is expected to test the key resistance at $35 (₹102,500). A decisive breach of these levels may take the metal quickly to $37 (₹1,08,000). In the near term, the $33.50-$33.70 (₹98,200-₹98,800) zone will act as a key support zone.
(Disclaimer: This article is by Praveen Singh – associate VP, fundamental currencies and commodities, Mirae Asset Sharekhan. Views expressed are his own.)
