Silver Rose As Fed Could Start Cutting Interest Rates As Early As September

(July 8, 2024 - Commodities)

Silver prices surged by 1.73% yesterday, settling at 93554, driven by increasing expectations that the US Federal Reserve could initiate interest rate cuts as early as September. This sentiment was bolstered by softer-than-expected US economic data, coupled with remarks from Fed Chair Jerome Powell indicating a shift towards a disinflationary trend. The outlook for silver was further boosted by anticipated stronger demand from the renewable energy sector, where silver plays a crucial role due to its conductivity and application in photovoltaic cells for solar panels. In China, the economic outlook remains uncertain amid mixed data, with markets awaiting signals from the upcoming Third Plenum for potential stimulus measures.

Federal Reserve Bank of New York President John Williams noted that the neutral interest rate, which balances the economy in the long run, has likely not risen significantly, underscoring ongoing concerns about economic growth and inflation dynamics. India's silver imports in the first four months of the year have already surpassed the total for all of 2023, driven by rising demand from the solar panel industry and investor interest in silver's potential outperformance compared to gold. Importantly, nearly half of India's silver imports this year came from the United Arab Emirates, taking advantage of lower import duties.

Technically, the silver market saw fresh buying momentum, with a 6.46% increase in open interest, settling at 24,411 contracts, while prices surged by 1593 rupees. Currently, silver is supported at 91975, with a potential test of 90395 if it breaks below this level. On the upside, resistance is likely at 94660, with potential for prices to test 95765 upon breaching this level.