Easing tensions
Analysts turn bullish on silver as US-China tensions on trade tariffs ease
This story was originally published at 18:18 IST on 12 May 2025
Register to read our real-time news.Informist, Monday, May 12, 2025
By J. Navya Sruthi
MUMBAI – Gold prices fell Monday after the US and China agreed to suspend most of the tariffs on goods imported from each other for 90 days effective Wednesday. This affected the safe haven demand for the precious metal. Over the weekend, India and Pakistan also reached an understanding, leading to an end of hostilities between the neighbouring countries.
Taking a cue from gold, silver prices also corrected but not as much as the yellow metal. Analysts see this as the right time to invest in silver, owing to its industrial demand.
Prices of gold on both the COMEX and the Multi Commodity Exchange of India fell about 4% from the previous close. On the other hand, prices of silver were down only 2% from the previous close. At 1635 IST, the most-active June gold contract on the MCX was down 4% at INR 92,600 per 10 grams. The most-active June gold contract on COMEX was nearly 4% lower at $3,214.5 per ounce. At 1635 IST, the most-active July contract of silver on the MCX was down 2.4% at INR 94,429 per kg and the same-month contract on COMEX fell 2.4% to $32.13 per ounce.
On Monday, the US and China agreed to suspend most of the tariffs on goods imported from each other for 90 days effective Wednesday. The US reduced its reciprocal tariff on Chinese goods to 10% from 125%. With the 20% tariffs announced in February and March against Chinese goods remaining in place, the total tariff against Chinese goods will now be 30%. At the same time, China agreed to cut tariffs on US goods to 10% from 125%.
"Indo-Pak ceasefire, easing of US-China trade war led to a rebound in global equity markets where we see investors preferring risky assets over safe-haven assets like gold," Manoj Kumar Jain, director, Prithvi Finmart, said. Fundamentals are against gold prices in the short-term, he added. Jain sees support at $3,140-$3,000 per ounce for June gold contract on the COMEX and resistance at $3,330 per ounce. On domestic bourse, he sees support for the June contract at INR 90,000-INR 89,000 per 10 gm and further downside to INR 87,700 per 10 gm. Resistance is seen at INR 94,000 per 10 gm.
An analyst at Kotak Securities see support for domestic gold prices at INR 91,500-INR 89,600 per 10 gm and further downside to INR 88,500 per 10 gm. They see resistance at INR 94,800 per 10 gm. The analyst sees support at $3,270-$3,250 per ounce for COMEX June contract and resistance at $3,400 per ounce. The broking firm is bearish on gold and expects the COMEX June gold contract to fall to as low as $2,950 per ounce. However, the brokerage firm sees buyers entering into the market at $3,250 per ounce.
The easing in trade tensions between the US and China also lifted the Dollar Index, which further weighed on prices of both the dollar-denominated commodities. At 1636 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was up over 1% at 101.83. A firm dollar makes commodities priced in the greenback expensive for holders of other currencies, denting demand for such commodities.
By the end of this month, the Dollar Index is expected to recover to 104.30, said Ajay Kedia, director, Kedia Advisory, adding that this recovery in the currency will also weigh on prices of the precious metals. Kedia advised short-term buyers to wait and watch as he anticipates further downside in gold prices.
SILVER LINING
The easing of trade tensions between the two major nations in the world has also led to a rise in prices of crude oil and base metals. Analysts attribute the 2?ll in silver prices to fall in gold prices, but support from rise in prices of base metals. The analyst with Kotak Securities said silver finds use as an industrial metal such as in the making of solar panel.
Kedia said the gold-silver ratio, which measures the ounces of silver to buy an ounce of gold, is currently at 100, down from 105. The fall in ratio shows the drop in uncertainty, he added.
Kedia sees support for July silver contract on the COMEX at $30.80 per ounce and resistance at $33.60 per ounce. For the same-month contract on MCX, he sees support at INR 93,390-INR 90,240 per kg and resistance at INR 97,280 per kg.
Prithvi Finamart's Jain sees support for July silver contract on the COMEX at $31.40 per ounce and resistance at $33.30-$34.00 per ounce. For the same-month contract on MCX, he sees support at INR 92,500 and resistance at INR 96,650-INR 98,200 per kg and further upside about INR 100,000 per kg. End
US$1 = INR 85.37
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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