IGI Logo

Below are Quote and Outlook on Silver and Natural gas By Mr. Abhishek Bansal, Founder Chairman, Abans Group. 

Air conditioning demand in the US is keeping Natural Gas prices higher

The above-normal temperatures forecast is the US is keeping Natural Gas prices higher. July month expiry contract is currently trading at $3.085, registered high of 3.149 yesterday which is the highest level in last 3-1/2 months.  Weather data agency Maxar is excepting above-normal temperatures in the northern half of the US from June 1-15, with well-above-normal temperatures in the Upper Midwest and Northeast from June 6-10. Above normal temperature increases Air cooling demand which indirectly helps NG prices. Power producing companies use natural gas to produce electricity.
 Natural gas prices are also finding support export demand and increasing domestic electricity production. As per Bloomberg data, Gas flows to US LNG export terminals on Tuesday was 11.1 bcf, about triple y/y. On Apr 18, gas flows to US LNG export terminals climbed to a record 11.921 bcf (data from 2014). US electricity output in the week ended May 22 rose +5.4% y/y to 72,050 GWh (gigawatt hours).
However, Natural Gas prices are likely to find some resistance due to weak domestic demand. NG demand in the lower in the US on Tuesday fell -10% y/y to 54.9 bcf. The US gas production is also increasing which is negative for prices.  As per Bloomberg data showed US gas production on Tuesday was up +3.4% y/y at 89.774 bcf/d.
As per the last EIA weekly inventory report, US gas inventories in the week ended May 21 rose +115 bcf to 2,215 bcf, against expectations of a +105 bcf increase. Current natural gas inventories are down -15.2% y/y and -2.8% below their 5-year average.
The gas rig count is an early indication of production. Baker Hughes reported last Friday that the number of active US natural gas drilling rigs in the week ended May 28 fell by -1 rig to 98 rigs, well above the record low of 68 rigs posted in July 2020 (data since 1987).

Natural Gas July month contract expiry prices are likely to remain firm while above the key support level of 20 days EMA at $2.971 and 50 days EMA at $2.884. Meanwhile, it is likely to face stiff resistance of around $3.247

A sharp recovery in the dollar index pushed Silver prices down

The dollar index bounced from yesterday’s low of 89.65 and currently trading near 90.14, sharp recovery in the dollar index against other currencies has pushed precious metals prices down. Silver is currently trading near $27.815 which is sharply lower than yesterday's high of $28.698.
However, an increase in global manufacturing activity is bullish for industrial metals and supportive of silver prices.
On the economic data front, The U.S. May ISM manufacturing index rose +0.5 to 61.2, stronger than expectations of 61.0. Also, the China May Caixin manufacturing PMI rose +0.1 to a 5-month high of 52.0. In addition, the Eurozone May Markit manufacturing PMI was revised upward to 63.1 from the previously reported 62.8, the strongest pace of expansion since the data series began in 2018. Finally, the Japan May Jibun Bank manufacturing PMI was revised upward to 53.0 from the previously reported 52.5.
Inflation expectation is likely to keep precious metals under pressure as global central banks may pause some covid-19 relief funds to control the inflation. Eurozone May CPI rose +2.0% y/y, slightly stronger than expectations of +1.9% y/y and the fastest pace of increase in 2-1/2 years.
However, comments from St. Louis Fed President Bullard are likely to keep precious metals under pressure. He said the U.S. jobs market is "tighter than it looks" and the Fed is close to launching a discussion about tapering its $120 billion-a-month asset purchase program.
According to the CFTC Commitments of Traders report for the week ended May 25, net long for silver futures dropped by 499 contracts to 50482 for the week. Speculative long position dropped by 621 contracts, while shorts dropped by 128 contracts.

Silver prices are likely to find immediate support levels near 20 days EMA at 27.709 and 50 days EMA at 27.188 while immediate resistance levels are seen near $28.454 and $28.966

Above views are of the author and not of the website kindly read disclaimer