Commodity Talk: Silver down by Rs 5,000/kg in June. Is it setback to Rs 1 lakh target in 2024?

Federal Reserve’s more hawkish stance at its June meeting, with policymakers signalling a preference for only one interest rate hike by year-end, had supported the US dollar so far, contributing to silver’s losses, Naveen Mathur, Director – Commodities & Currencies, Anand Rathi Shares and Stock Brokers said. However, the risk of heightened geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict could limit sharp decline in silver prices, he opined rejecting setback fears.

Silver has fallen by Rs 5000/kg in June so far. Do you see this as a setback to the Rs 1 lakh target that was estimated for 2024?
Silver prices have outperformed Gold so far this year as they have been driven primarily by concerns of record market deficit persisting for the third consecutive year as estimated by the Silver Institute. This along with investment led demand from major consumers such as India have kept the white metals supportive at lower levels. This had led many analyst to believe that the white metal could even surpass 1 lakh per kg in this year.
However, recent corrective moves in the white metal is seen as a profit booking opportunity from its all time highs. Historically, seasonality shows that silver monthly returns for July– August had remained positive considering last 50 year perspective indicating silver prices further witnessing likely corrective moves from the current levels. This could be seen as accumulation strategy with Rs 1 lakh per kg target remaining intact for the later part of the year.

Is the dollar strength and Fed rate uncertainty the reason for this decline?
The Federal Reserve’s more hawkish stance at its June meeting, with policymakers signalling a preference for only one interest rate hike by year-end, had supported the US dollar so far, contributing to silver’s losses. Meanwhile, the risk of heightened geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict could limit sharp decline in silver prices.

However, in near term traders could remain cautious before taking strong buying positions, particularly with key US macroeconomic data playing a crucial role in the way bullion trades. To what extent do you see corrections happening in silver in the near term?
We do see further corrective moves of upto 2 – 3 % in prices in case US macro cues support the dollar further in near term. However silver is still expected to witness new all time highs this year driven by concerns of 2 rate cuts to persist driving investment demand in white metal.How should one trade in this precious metal?
Near term volatility is expected to persist in silver prices where one should only accumulate the white metal at dips of 2 – 3 % in prices in a short to medium term perspective.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)