Silver Under Pressure, Market Sentiment Dominated by Long Liquidation
05 Jun 2023
Silver Faces Pressure Following Strong US Jobs Report, Long Liquidation Dominates Market Sentiment.
Silver’s Historical Performance and Market Dynamics
Silver Yesterday: Silver prices declined by -0.79% to settle at 72020 following the release of a robust payrolls report, which revealed stronger-than-expected job growth in the US. The unexpected addition of 339K jobs surpassed the forecast of 190K, but the unemployment rate rose to a 7-month high of 3.7%, surpassing the expected rate of 3.5%. Wage growth also slowed as anticipated. These factors influenced the market sentiment for silver.
Fed’s Monetary Policy Outlook:
Federal Reserve Governor Philip Jefferson and Philadelphia Fed President Patrick Harker indicated that the central bank might refrain from a rate hike in the next meeting. However, they emphasized that such a decision should not be interpreted as the end of the tightening cycle. This mixed messaging from Fed officials added to the uncertainty surrounding future interest rate moves.
Debt Ceiling Concerns Alleviated:
The approval of the Fiscal Responsibility Act of 2023 by the House of Representatives, expected to be passed by the Senate before the June 5 default deadline, helped allay concerns about a potential US default. The deal suspends the government’s debt ceiling until 2025, providing relief to the market. This development had an impact on the market sentiment for silver.
Market Expectations and Rate Hike Probabilities:
Traders now assign a nearly 66% chance that the Fed will leave interest rates unchanged this month, compared to the previous estimate of 75% prior to the release of the jobs report. Approximately 34% of investors now anticipate a 25bps rate hike by the Fed. These changing expectations influenced Silver’s performance.
Technical Analysis and Long Liquidation:
From a technical standpoint, the silver market experienced long liquidation, with a drop in open interest by -5.41% to settle at 13288. Prices also declined by -574 rupees. Currently, silver finds support at 71635, and a further downward move could test the 71249 levels. On the upside, resistance is likely to be observed at 72703, and a break above this level may lead to a test of 73385.
Past History of Silver:
Throughout its history, silver has been influenced by various factors, including economic indicators, monetary policy decisions, and market sentiment. Precious metal is known for its dual nature as both an industrial and a precious metal, making it susceptible to fluctuations in supply and demand dynamics. Additionally, silver often serves as a safe-haven asset during times of economic uncertainty, leading to increased investor interest.
Silver faced downward pressure following the release of a strong US jobs report and the approval of the Fiscal Responsibility Act of 2023. The unexpected job growth and rising unemployment rate, combined with the uncertainty surrounding the Fed’s monetary policy, contributed to market volatility. Meanwhile, the resolution of the debt ceiling issue alleviated concerns and affected the overall sentiment. Technical indicators pointed towards long liquidation in the silver market. As silver continues to respond to economic and geopolitical developments, market participants will closely monitor these factors to gauge future price movements.