TotaFX Capital Market Insights Blog
Published on 12-11-2024
Silver prices faced significant pressure, dropping by 2.29% to settle at 89,182, as the U.S. dollar surged, hitting its highest level since early July. This dollar rally marks a six-week winning streak, bolstered by market speculation of continued pro-business policies under a possible Trump administration. Expectations of tax cuts and deregulation are fueling inflation concerns, further strengthening the dollar as higher inflation expectations limit the Federal Reserve’s flexibility for rate cuts. The odds for a 25 basis point Fed rate cut in December have now dipped to 69%, down from 80% pre-election, reflecting the reduced likelihood of easing monetary policy.
Impact on Silver
The rising dollar has placed downward pressure on silver, which tends to struggle as the dollar appreciates, making it more expensive for non-U.S. buyers. Silver has been particularly vulnerable this week, with key economic data such as inflation figures, retail sales, and industrial production reports set to further sway market sentiment. These data points will give traders more insights into the health of the U.S. economy and the Fed’s likely path on interest rates.
Global Demand for Silver: A Boost from India
Despite the current dip, India’s robust silver demand could help offset some of the downward momentum. India, the world’s largest silver consumer, has nearly doubled its silver imports in 2024, driven by industrial needs, especially in the solar panel and electronics sectors. In the first half of 2024 alone, India imported 4,554 tons of silver, a monumental rise from 560 tons a year prior. Industrial consumers, particularly in Asia, are also stockpiling in response to last year’s inventory shortages, which could support prices over the long term. This industrial demand, combined with silver’s role as a hedge in uncertain economic times, keeps it attractive for investors seeking alternatives to gold.
Technical Analysis: Silver’s Immediate Outlook
Silver’s technical setup shows fresh selling pressure as open interest in futures contracts rose by 4.31% to 24,266 contracts, reflecting persistent bearish sentiment. Immediate support for silver is currently positioned at 88,180. A breach below this level could open doors to the next support level at 87,180, marking a critical area for traders to watch. Conversely, if silver prices manage to gain bullish momentum, key resistance stands at 90,910, with an extended resistance target of 92,640.
The technical outlook suggests that traders should exercise caution with the potential for rebounds, especially if upcoming U.S. economic data proves unexpectedly positive. This data could influence both the U.S. dollar’s trajectory and precious metals, making this a pivotal time for silver in the near term.
The Road Ahead
With global silver demand on the rise and India’s imports surging, silver’s longer-term fundamentals remain robust. However, the strong dollar continues to cast a shadow, making it an unpredictable landscape for traders and investors. Economic data releases this week will be crucial in shaping short-term price movements for both the dollar and silver, as investors await more clarity on the Fed’s policy direction and potential market shifts.
