Commodity Trade Mantra

Will Silver Prices Continue Bull Run or is a Correction Close-by?

Will Silver Prices Continue Bull Run or is a Correction Close-by?

Money managers increase long positions in silver

Livemint: The year 2017 has started on a good note for precious metals, and gold and silver prices were clear beneficiaries of the uncertainty in global markets since Donald Trump became US President. Gold and silver prices have rallied in the past one month. Silver prices gained by a good margin last month with gains of around 10% in the international markets and 7.5% in the domestic markets, said an Angel Broking report. The run-up in base metals also contributed to the rise in silver prices. It further pointed out that net longs in silver increased by 62,964 contracts as on 31 January 2017. However, there is a possibility of these longs getting liquidated in the weeks ahead which will pressurize silver prices.

Hence, the rally will not last long and there might be a correction if this happens. MCX silver prices might move lower towards Rs40,500 mark in a very short period of time, the broking firm cautioned.

RBI takes a breather from protecting rupee

Data from the Reserve Bank of India (RBI) shows that the RBI bought $463 million in December, a departure from being a big seller in November. This was expected as the central bank prefers a hands-off approach in the case of the exchange rate and would intervene only in the case of a strong need.

In December, the outflow of foreign currency non-resident deposits redemptions abated, which means that the central bank could take a breather from protecting the rupee. Further, compared with other Asian peers, the rupee has performed well. Over the past two months, the rupee has shown a bias toward appreciation too.

Working capital pressures may ease for fertilizer firms

Fertilizer companies which are facing working capital pressures due to delays in subsidy receivables and rise in short-term debt may see some relief in the coming fiscal year.

Stable subsidy allocation by the central government, reduction in customs duty on liquefied natural gas in the Union budget and low gas prices can lower subsidy receivables for urea producers and reduce subsidy arrears in 2017-18, India Ratings & Research said in a note.

As of December 2016, estimates peg the subsidy arrears at around Rs30,000 crore. The gains on working capital, however, can be delayed if crude prices, to which gas prices are now linked, rise significantly, the ratings agency warns. Gas is used in the fertilizer manufacturing process.

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