Silver prices are rising and the precious metal is outpacing gold as a result of a change in risk mood, a weaker US dollar, and increased anticipation that the Federal Reserve would lower interest rates in the second half of the year.
Silver has made big gains this month, rising more than $3, its greatest monthly performance since December 2020, as March comes to a conclusion. The settlement price for May silver futures on Friday was $24.235 per ounce, up 1% for the day and almost 4% for the week.
The gold-silver ratio has dropped to a two-month low and is currently trading around 82 points, so silver’s surge is even outperforming gold.
Fawad Razaqzada, a market analyst at Forex.com, stated in a note on Friday that the ratio’s plunge below 86 points last week was a noteworthy move that broke support of a negative trend line.
This chart is telling us that silver should shine more brilliantly if the bullish trend for both metals holds, he said.
On silver’s technical outlook, Razaqzada claimed that given the market’s tendency of higher highs and lower lows, it might not take long for the precious metal to surpass $24.50 an ounce and stop its two-year slump.
If silver closes above $23.90, according to Ole Hansen, head of commodity strategy at Saxo Bank, it has room to rise to $25 or perhaps $27 per ounce.
He stated on Twitter that “the metal remains under-owned.”
According to specialists who examined the fundamentals of the precious metal, silver benefits from being both a safe haven and a risk-on asset.
Experts point out that while concerns over the global banking crisis are lessening, there is a growing sense of hope for the world economy, which is good news for silver’s industrial component. At the same time, the precious metal is receiving some safe-haven support due to worries that this is just the beginning of the storm.
The rapidly approaching debt ceiling, according to Jonathan Butler, a precious metals analyst at Mitsubishi, might continue to stimulate demand for safe-haven investments in precious metals even if the banking crisis is handled.
“Coming at a time of uncertainty and increased financial commitments from the government as it may be required to backstop more bank depositors, silver (and gold) may continue to be in demand as a safe haven,” Butler said in a report released Thursday. “The nonpartisan Congressional Budget Office has estimated the government will exhaust its emergency tools sometime this summer, which raises the prospect of a default unless lawmakers can raise or suspend the ceiling.
Similar to how gold is doing well as a monetary metal, silver is also doing well because inflation data that was lower than anticipated is adding to the belief that the Federal Reserve has stopped rising interest rates.
On Friday, the U.S. In contrast to January’s 0.5% gain, the Department of Commerce said that its core Personal Consumption Expenditures price index increased by 0.2% last month. Although economists had predicted a 0.4% increase, the results came in little weaker than expected. Core PCE inflation increased 4.6% during the previous 12 months.
Markets anticipate a 50% chance that the Federal Reserve will maintain rates following its monetary policy meeting in May, according to the CME FedWatch Tool. Markets continue to anticipate a rate drop in the second half of the year at the same time.
As silver continues to have strong bullish support, TD Securities analysts warned that near-term profit-taking may occur in the market. The bank did emphasize that there is still strong physical demand for the precious metal, notably from China.
Given recent indications that merchants in Shanghai are stockpiling silver once more, which speaks to sustained demand for silver even as commodity internals point to sluggish demand for raw materials, the analysts added, “the white metal continues to retain a good risk-reward profile.” But, if prices rise above $25.20/oz, the white metal will be more likely to reach escape velocity, which would encourage trend followers to resume making long purchases.