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Silver eases after sharp rally; heading toward $28/oz, says Motilal Oswal

Both the momentum indicators RSI and MACD are also confirming positive moves for the metal.

Mumbai / May 07, 2021 / 03:55 PM IST
Silver

Silver

Silver prices dipped below Rs 71,500 per kg on May 7 after rallying sharply the previous day on improving demand outlook. The precious metal gave up morning gains after touching series high of Rs 72,160 and traded in the red, tracking a firm rupee.

The semi-precious metal has been trading higher than 5, 20, 50, 100 and 200-day moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 63.61, suggesting a bullish movement in prices.

The hybrid metal has started to add gain once again in 2021 after a brief correction from highs of Rs 77,950 it touched in March 2020.

The gold/silver ratio, which touched a record high of 127 on March 20, is trading at 65 levels, which is supportive for the metal.

Global industrial silver production is expected to grow at 8 percent in 2021. Demand pick-up could come from a recovery in vehicle manufacturing, electronics demand and from the solar sector.

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The US labour department reported that the number of Americans filing new claims for unemployment benefits fell below 500,000 last week for the first time since the pandemic started a year ago, as conditions continued to improve and the economy reopened more broadly.

Silver holdings in iShares ETF rose 40.4 tonnes to 17,684.11 tonnes. The fund NAV is trading at a premium of 2.24 percent.

The US dollar index eased 0.12 percent to 90.82 in the afternoon trade against the major cross.

The spot gold/silver ratio stands at 66.67 to 1, indicating that silver has outperformed gold.

MCX Bulldesk marginally up 2 points or 0.01 percent, at 15,003 at 15:24. The index tracks the real-time performance of MCX gold and silver futures.

Sriram Iyer, Senior Research at Reliance Securities said, “International silver prices are trading with small gains on Friday in early afternoon trade in Asia, tracking firm gold and weak Dollar. Technically, LBMA Silver Spot continued to remain above $27.00 indicating a strong bullish momentum for the rest of the session up to $27.70-$28.00 levels.”

Technically, MCX July silver continues to trade above Rs 71,000, indicating a strong bullish momentum for the rest of the session up to Rs 71,900-72,000. Support is at Rs 70,100-69,300 levels, Iyer noted.

In the futures market, silver for July delivery touched an intraday high of Rs 72,160 and a low of Rs 71,435 per kg on the MCX. So far in the current series, the precious metal has touched a low of Rs 63,456 and a high of Rs 72,160.

Silver delivery for the July contract fell Rs 219, or 0.31 percent to Rs 71,462 per kg at 1528 hours, with a business turnover of 10,886 lots. The same for the September contract slipped Rs 186, or 0.26 percent, to Rs 72,515 per kg with a turnover of 90 lots.

The value of July and September’s contracts traded so far is Rs 1,125.95 crore and Rs 4.58 crore, respectively.

Similarly, the Silver Mini contract for June declined Rs 284, or 0.40 percent at Rs 71,399 on a business turnover of 13,924 lots.

Jigar Dharamshi, Technical Analyst at Motilal Oswal said, “After breaking the downward sloping channel, the spot silver has turned positive and is trading in a rising channel formation, which signifies strength in the price for short-term.”

Motilal Oswal Motilal Oswal

Both the momentum indicators RSI and MACD are also confirming positive moves for the metal. Strong breakout is at $25.80 whereas the key breakout area is $26.90.

Price sustained break above immediate resistance area will lead the move towards the $28 mark, followed by $29.75 in the near term. Buying is advised as long as the price holds above support, Dharamshi added.

At 1006 (GMT), the precious metal was modestly lower 0.21 percent quoting at $27.41 an ounce in New York.
Sandeep Sinha

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