Global silver rate sinks to $88/ounce levels; what's causing white metal to fall sharply?

What's causing silver rates to fall? Silver rates made a sharp U-turn in Monday's trade, tumbling more than 5 per cent in international trade and taking its losses to 7.6 per cent from their intraday highs.

On COMEX, silver was last seen trading 5.2 per cent lower at $88.4 per ounce in a fall analysts attributed to a combination of factors such as:

• Weakening Industrial Demand: Weaker-than-expected demand from key industrial sectors -- that use silver heavily -- has added to downward pressure on the white metal.
• Rising Dollar: A stronger greenback makes the white metal dearer for those holding other currencies. This reduces demand and, in turn, hurts prices.
• Rising US Bond Yields: A spike in the US bond yields tend to make non-yielding precious metals like silver less attractive.
• Hawkish Fed Hopes: Market-wide expectations that the Fed, under its next Chair, could maintain higher interest rates for longer have hurt demand for precious metals like silver.
• Profit-booking: Investors have booked profits at higher level thanks to a near one-sided rally in precious metal rates last year.
• Slowing Global Demand: Weak manufacturing and industrial data from China -- a major consumer of silver for industrial uses -- points to weaker industrial demand, a negative signal for the white metal.

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MCX silver futures (May 5)

Back home, silver futures for May 5 delivery traded lower by Rs 4,028, or 1.4 per cent, at Rs 2,78,616.

The white metal contract plunged by as much as Rs 22,698 from its intraday high of Rs 2,97,799 to hit Rs 2,75,101 on the downside. That marked a swing of 7.6 per cent from the day's high.

On Monday, a broad-based sell-off on Dalal Street having its roots in the Middle East crisis cost investors Rs 6.6 lakh crore worth of wealth in a day, reflected in the mcap of BSE-listed companies, provisional data shows.

However, the sharp fall in equities -- which typically pushes investors towards precious metals as a safety net -- failed to contain the downside in silver.

Gold futures (April 2 delivery), on the other hand, firmly held on to the green with a gain of 2.7 per cent at Rs 1,66,401, having moved within a range of Rs 4,780 -- between Rs 1,65,100 and Rs 1,69,880.

What analyst says

Manoj Kumar Jain of Prithvi Finmart expects volatility in the white and yellow metals to continue this week, owing to wild moves in the dollar index, Israel-Iran war jitters and ahead of the incoming American jobs data.

"We are experiencing very high price volatility in both precious metals, but silver prices could hold its support level of $84.00 per troy ounce and gold prices could also hold its support level of $5,122 per troy ounce on a closing basis this week," said Jain.

Gold

• Support: $5,220-5,164 or Rs 1,60,600-1,58,800
• Resistance at $5,340-5,420 or Rs 1,64,400-1,67,000

Silver

• Support: $90.00-86.80 or Rs 2,78,000-2,71,000
• Resistance: $98.00-102.00 or 2,92,000-3,04,000

How to trade gold and silver now

Jain suggests buying gold above the Rs 1,63,300 mark for targets of Rs 1,65,000-1,67,000 with a stop loss below Rs 1,60,600.

He recommends buying silver above the Rs 2,85,500 mark for targets of Rs 2,89,800-2,96,000 with a stop loss below Rs 2,78,000.