Silver prices jump 3% for the week to Rs 66,941/kg; check outlook and strategy for next week



Silver prices edged lower to settle at Rs 66,941 per kg on April 9 as participants trimmed their positions as seen by the open interest. The precious metal tumbled tracking stronger dollar and weakness in gold and industrial metals.

It ended the week with a gain of Rs 1,894 or 2.91 percent on the domestic bourse. Silver prices rose in three out of the five trading sessions on the MCX.

The semi-precious metal has been trading higher than 5, 20, 100 and 200 days’ moving averages but lower than the 50-day moving average on the daily chart. The Relative Strength Index (RSI) is at 53.79 which indicates positive momentum in prices.

US President Joe Biden has laid out several plans in his policy that shows his support towards the clean and green economy, which will require a lot of infrastructure development, building of solar panels and supporting electric vehicles. This is very positive for the metal price as, silver is used in the production of these technologies and as and when demand rises, it will support the metal prices.

“Silver has given 48 percent return in 2020 and have had quite a good run till now in 2021 and based on the strong fundamentals for both industrial metals and precious metals, the future prospects of the white metal are looking quite impressive”, said Navneet Damani, Head Research – Commodities & Currencies, Motilal Oswal.

With regards to the safe-haven demand, supply and demand dynamics for silver were distorted just like gold, during the worldwide lockdown amidst the pandemic. With limitations in the physical market, ETFs saw an impressive response from market participants. iShare holdings at the start of 2020 were around 17,325 tonnes and currently, it is at 17,879 tonnes, he said.

Silver holdings in iShares ETF were unchanged for the fourth day at 17,880.11 tonnes. The fund NAV is trading at a premium of 0.03 percent.

The US dollar index ended modestly firm at 92.18, up 0.12 percent on April 9 against the major cross. The dollar index ended with a loss of 0.85 percent during the week.

The spot gold/silver ratio currently stands at 69.07 to 1 indicating that gold has outperformed silver.

MCX Bulldesk decreased 77 points or 0.53 percent to close at 14,566. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

In the futures market, silver for May delivery touched an intraday high of Rs 67,456 and a low of Rs 66,371 per kg on the MCX. So far in the current series, the precious metal has touched a low of Rs 59,826 and a high of Rs 75,501.

Silver delivery for the May contract tumbled by Rs 540, or 0.80 percent to settle at Rs 66,961 per kg with a business turnover of 9,415 lots. The same for the July contract slipped by Rs 467, or 0.68 percent, to Rs 68,051 per kg with a turnover of 834 lots.

The value of May and July’s contracts traded on April 9 was Rs 2,648.64 crore and Rs 141.67 crore, respectively.

Similarly, the Silver Mini contract for April tanked by Rs 530, or 0.78 percent at Rs 67,003 on a business turnover of 10,999 lots.

The precious metal settled with a loss of 1.06 percent at $ 25.31 an ounce in New York.

Next Week Outlook

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

Strategy:  Silver is also trading firm along with the gold but is not able to cross the higher side resistance of 50-day SMA at Rs 67,450. For the coming week, silver can be bought near Rs 66,300 – Rs 66,400 regions with the stop loss of Rs 65,500 for the target of Rs 68,300.

Rationale: Silver breached the upper side of the hammer that was formed during the previous week and is trading near its 50 SMA. It is more likely to see bullish pressure as price gives two successful closing above the 100-day SMA placed at Rs 66,300. It will also act as strong support for the shorter term.

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