Silver prices remain vulnerable amidst weakness in industrial commodities
Spot silver was trading with a loss of around 1 per cent at $27.72 at the time of the MCX closing. Silver fell despite a sharp decline in the US yields and a weaker US Dollar. MCX September silver contract at Rs 81,110 (LTP) was down around 0.55 per cent. Weakness in silver could be attributed to weakness in outside markets, especially industrial commodities. Most of the commodities fell despite largely softer than expected US PPI data (July).
Data roundup: US PPI largely softer than expected
US PPI rose in July at a slower than expected pace as the services costs declined for the first time this year. The PPI for final demand (July) was up 0.10 per cent m-o-m Vs the forecast of 0.20 per cent increase. The PPI ex food and energy was unchanged (forecast +0.20 per cent) in July, which is the slowest pace since March. Services costs fell by 0.20 per cent; however, prices of goods increased 0.60 per cent, the most since February. PPI Ex food and energy data rose 2.40 per cent y-o-y (forecast 2.60 per cent) as compared with 3 per cent in June. PPI final demand rose 2.20 per cent y-o-y (forecast 2.30 per cent). However, PPI ex food, energy and trade at 0.30 per cent m-o-m was hotter than the estimate of 0.20 per cent. Similarly, PPI ex food, energy and trade at 3.30 per cent was hotter than estimate of y-o-y basis, too.
The UK’s monthly job report for June was mixed as unemployment rate fell from 4.40 per cent in June to 4.20 per cent in July (forecast 4.0 per cent), though jobless claims surged to 135K in July from 36.20 in June. The Euro-zone’s ZEW survey expectations (August) came in at 19.20, which trailed the forecast of 34.
US Yields and the Dollar Index: US 2-year yields back below 4 per cent
The US Dollar Index and the yields slumped on mostly softer than expected US PPI data (July). The ten-year US yields were down 1.29 per cent to 3.86 per cent on largely subdued US PPI data. The two-year US yields were back 4 per cent as the yields dipped over 1.50 per cent to 3.96 per cent. Consequently, the US Dollar Index slid 0.40 per cent to 102.72, the lowest since August 5. Improved risk appetite also weighed on the US Dollar Index.
ETFs and inventory: Mixed
Total known silver ETF holdings rose to 717.172 MOz on August 12 from 716.497 MOz on August 9. Meanwhile, COMEX silver inventory rose to 303.34 MOz on August 12 from 302.400 MOz on August 9; thus, the COMEX inventory continues to be around the highest level since July 2022.
Upcoming data: US CPI data crucial
Today’s US data on tap include crucial CPI inflation (July). The UK’s CPI data (July) will also be released today. The Euro-zone’s second quarter GDP growth rate, employment and industrial production data will also be on the deck today.
The UK’s second quarter GDP growth rate and Chinas retail sales, industrial production and home prices data will be released on August 15. US Retail sales advance (July), import price index, industrial capacity and weekly jobless claims data will be released on August 15.
Outlook
Silver continues to lag gold as investors are concerned about the global economy, especially the Chinese and the US economies. Gold/Silver ratio has surged sharply higher from around 72 seen a few days back to around 90. Silver is following mostly industrial commodities rather than gold. So, silver may continue to remain under pressure if industrial commodities are weak. Nonetheless, investors are expected to buy the dips in the metal ahead of the US CPI data and Jackson Hole Symposium, which will held on August 22-24.
Extreme volatility is expected in the counter on US CPI and retail sales data. Indian traders need to exercise caution as US retail sales data will be released on August, a public holiday for the Indian bourses.
Disclaimer:Praveen Singh is Associate Vice President of Fundamental Currencies and Commodities at Sharekhan by BNP Paribas. Views expressed are his own.
First Published: Aug 14 2024 | 8:47 AM IST
