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Home Commodities Silver outlook for June 26: Bearish trend; MCX September contract support at Rs 88,000 | Market News

Silver outlook for June 26: Bearish trend; MCX September contract support at Rs 88,000 | Market News

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Silver falls after hawkish Fed comments and positive U.S. data


Silver’s recent performance:

Spot silver fell on Tuesday following a brief rebound on Monday. The metal fell on the back of hawkish comments from the Federal Reserve, renewed inflation concerns due to Canadian inflation data, and the possibility of a strong monthly U.S. jobs report.

Risk appetite was low as markets were generally down and commodity prices were down across the board.

At the close of trading on MCX, spot silver was trading at Rs 28.90, down 2.45% on the day, while the MCX September silver contract was trading at Rs 89,257 a pound (LTP), down 1.89%.


Federal Language:

Federal Reserve Governor Michelle Bowman said on Tuesday that several upside risks to the inflation outlook make it preferable to keep borrowing costs high for now.

Meanwhile, Federal Reserve Governor Lisa Cook said improving inflation measures mean it would be appropriate to cut interest rates at some point, but cautioned that the timing of any cuts would depend on the direction of economic indicators and how that affects the economic outlook and the risk balance.


US Dollar Index and Treasury Yields:

The 10-year US Treasury yield rose 0.12% to 4.243% at the close of trading on MCX. The yield has recovered nearly 1% from the intraday low. The US Dollar Index was at 105.63, up 0.15% on the day.


Summary of data:

The U.S. central consumer confidence index fell slightly to 100.40 in June from 101.30 in May, but the current situation index improved as the expectations index fell to 73 from 74.9.

June Nonfarm Payrolls Report Could Be Strong – The US June Conference Board Consumer Sentiment Index Labor Market Difference data rose for the first time since January, signaling an improving job market. Five of the eight Fed surveys released this month suggest an improving US employment situation, and S&P Global’s June preliminary PMI report released last Friday showed that service sector payrolls rose to their highest level in five months, while manufacturing payrolls grew at their fastest pace in 21 months. These data points to a possible strong June nonfarm payrolls report, which has resulted in increased downward pressure on silver and other commodities.

Among notable developments, Canada’s Consumer Price Index rose 2.9% year-on-year in May, up from 2.7% the previous month and above expectations of 2.6%. On a monthly basis, the Consumer Price Inflation Index rose 0.6% compared to expectations of a 0.3% increase, up from 0.5% in April.


ETF Flows and COMEX Inventories:

As of June 24th, total global silver ETF holdings stood at 685.646 million ounces, slightly lower than last weekend’s level.

COMEX inventories were at 297.415 million ounces as of June 24th 2024, the highest level since June 4th.


Future data:

Key US data today include new home sales (May), but investors will be more focused on US GDP (final first quarter figure) and PCE deflator inflation (the Fed’s preferred inflation measure) data, due on Thursday and Friday, respectively.


Outlook:

Canada’s latest inflation data calls into question views of disinflationary trends in G10 countries. The three-month change in the median CPI for developed markets (DM) is moving back into positive territory, according to Bloomberg. The growing likelihood of a stronger US nonfarm payrolls report is also a negative for the metal.

In this scenario, metals are expected to trade in a bearish trend unless US GDP disappoints or US PCE deflator inflation data disappoints.

Support is at $28.50 (Rs 88,000 MCX September silver contract)/ $28 (Rs 86,500), while resistance is at $29.75 (Rs 92,000)/ $30 (Rs 92,600).

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Disclaimer: Praveen Singh is the Vice President, Fundamental Currencies & Commodities at Sharekhan by BNP Paribas. The opinions expressed here are his own.

First Edition: June 26, 2024 | 08:37 AM IST

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