Silver market was in consolidation stage in the month of May with ups and down reacting to gold and base metals market. Comex silver futures traded in the range of $16.00 - $16.56 per ounce in May 2018. Geo-political tensions between US and North Korea, Turkey and China kept the silver market under pressure in May. However, rising consumption demand for metals by China following robust economic growth gave some support to silver.
China’s trade surplus narrowed to USD 28.78 billion in April of 2018 from USD 37.45 billion in the same month a year earlier but above market consensus of USD 24.7 billion. Imports jumped 21.5 per cent year-on-year to USD 171.64 billion, while exports rose by 12.9 per cent to USD 200.49 billion. China's industrial production rose 7 per cent y-o-y in April 2018, beating market consensus of 6.3 per cent and after a 7-month low of 6 per cent in March. The Official NBS Manufacturing PMI in China increased to 51.9 in May 2018 from 51.4 in April, beating consensus of 51.3. It is the highest reading since September 2017, due to faster rise in output, new orders and new export orders.
Meanwhile, in the US industrial production increased by 0.7 per cent month-on-month in April 2018, beating market expectations of 0.6 per cent. The US economy expanded at an annualised 2.2 per cent in the first quarter of 2018, below market expectations of 2.3 per cent. Private businesses in the United States hired 178,000 workers in May against 163,000 in April, below market expectations of 190,000.
The United States said that it still holds the threat of imposing tariffs on $50 billion of imports from China and will use it unless Beijing addresses the issue of theft of American intellectual property. US benchmark 10-year Treasury yields posted their largest one-day drop on June 5 since Britain voted to exit the European Union nearly two years ago. The US Federal Reserve will have difficulty raising interest rates significantly beyond the settings of its Japanese and European counterparts, which are still pursuing accommodative policy, President of St. Louis Federal Reserve Bank James Bullard said earlier.
Notwithstanding, China lashed out at renewed threats from the White House on trade, warning that it was ready to fight back Washington.
Industrial demand is increasing globally and ought to benefit from the pro-growth agenda of the US. Strong growth in the solar photovoltaic sector, new vehicles, electronics applications and jewellery are set to boost demand. Mine production is currently below its five-year average, which is likely to keep supplies flat. US Federal Reserve is likely to raise interest rates only slowly and conservatively and be disinclined to get ‘ahead of the curve’ despite the US economy growing at full steam and signs of rising inflation beginning to emerge. Negative speculative positioning, Gold Silver Ratio at historical higher levels and strong industrial demand are likely to support silver prices.
The author is deputy general manager, Karvy Comtrade Limited