Is silver worth US$28.50 an ounce?
One analyst remarked that silver is now 'only marginally undervalued as compared with gold', with the gold-silver ratio now down to a 3.5-year low.
What is the price of silver futures?
Silver rallied for a second straight day on Tuesday 18 August 2020, following a volatile week that saw prices plunge as much as 20%.
Silver is up 9% so far this week, with investors rushing to accumulate physical assets in the face of a falling US dollar.
As at 14:40 GMT on Tuesday, silver’s September 2020 contracts are trading at US$28.44 per ounce on the IG platform.
IG’s market analysis shows that ‘buys’ form 51% of all trades on the counter today, with ‘sells’ comprising 51% of all trades across the week so far.
Why is the price of silver rising?
Silver prices are on the rise again this week because of US dollar weakness, according to Daily FX strategist Margaret Yang.
The US Dollar Index has been steadily dropping since last Friday (14 August 2020), touching 92.50 on Tuesday – its lowest level since May 2018.
Commerzbank analyst Carsten Fritsch says silver’s latest rally is also likely due to ‘robust’ ETF inflows in recent days.
‘ETF investors apparently viewed the significantly lower silver price in the interim as a buying opportunity,’ he noted.
The greenback’s present bearishness – caused by market uncertainty amid a lack of economic direction – has also sent gold prices up 4% at the start of this week. Gold is currently trading above US$2,000 an ounce.
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Silver’s current bullishness is a stark contrast from the previous week, when prices had experienced a series of sharp increases and declines all within a span of four days.
As Fritsch previously stated, profit-taking by investors had been the main catalyst of silver’s massive price rout last Wednesday to under US$24 an ounce.
What is the silver price forecast?
Investors are now looking towards Wednesday’s US Federal Reserve meeting minutes, an upcoming review of US and China’s phase one trade deal, as well as central bank policy guidance and geopolitical prospects, says Yang.
Against this backdrop of ultra-loose monetary policy, geopolitical and pandemic risks, and a low interest rate environment, she posits that the mid to long term price outlook of precious metals remains bullish.
Meanwhile, Fritsch remarked that silver is now only 'marginally undervalued as compared with gold', with the gold-silver ratio down to 73 (from an all-time peak of 115 recorded in April this year). This is the lowest point since April 2017.
On the flipside, CPM Group's managing partner Jeffrey Christian predicts that silver prices will taper off in the last quarter of the year.
Christian previously told investment sites that he foresees prices ‘plateauing’ between September and November as industrial demand for silver has been recovering slower than production. This has resulted in 'some bearishness hanging over the physical silver market', he said.
In the immediate future, however, Yang notes that the overall technical trend for silver is still looking bullish as the 20-, 50- and 200-Day Simple Moving Average (SMA) lines are ‘nicely trending up’.
Live IG client data also indicate a general expectation for silver prices to keep rising in the near term, with 86% of all opened accounts holding ‘buy’ (long) positions on the commodity.
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