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Is It The Right Time To Buy Silver?

Published 08/04/2016, 03:18 PM
Updated 04/25/2018, 04:40 AM

As the Federal Reserve remains indecisive on the next rate hike, precious metals traded mixed for the past sessions. Gold futures soared at the start of the week but it eased as the central banks declared their monetary policies. However, silver remained steady despite the losses as expected by the analysts.

Silver futures could turn bullish in the coming months and may touch the forecasted $25 or even more than that in light of the same movement of the commodity in 2011. In the first week of July, the white metal gained almost 3 percent and sustained the gains. Since, it did not start the year immediately bullish, the rally will likely remain longer than the other commodities.

Looking through the records, silver typically outperforms the yellow metal in a bull market for the precious metals while in a bear market the opposite happens, gold takes the wheel and the white metal will be left behind.

Based on the forecast of Nasdaq, investors are expected to invest in silver. “Many investors view silver as a leveraged play of gold, as per ETF Securities. So, while you can play gold ETFs like GLD or IAU with a short-term view, it might be better to tap silver ETFs.”

Nevertheless, as the Fed signaled for a possible rate hike probably in September or December, the rally of silver futures paused for a while. The central bank may have definite reason to push the rate hike since ADP Research Institute reported that U.S. companies increased the number of workers in July.

Adding to the negative trend for the white metal was the soaring dollar. The greenback remained moderately steady after the weak downbeat U.S. service-sector data and the strong U.S job report.

Technically speaking, when the dollar is strong, the prices of commodities decline whereas when dollar changed hands lower than a basket of currencies, the prices of commodities go higher. This inverse relationship of the greenback and the commodities is closely watched by market participants whenever there’s a huge market event, such as rate hike.

Earlier today, silver traded 1.27 percent lower to 20.212 per ounce ahead of the highly anticipated meeting of the Bank of England. The bank is expected to announce a lower interest rate after the relative impact of post-Brexit. Also, the U.S. job data to be released on Friday was also on the table of the market participants.

This slump was expected but many market experts believed that it would still be stable in the last quarter of the year. A currency and commodity analyst forecasted that the silver may outperform the yellow metal until next year.

Considered as one of the most useful elements, the demand for silver persists for it has high thermal and high electric conductivity. Due to high usage of the white metal in industrial activities, the total demand from the industrial applications is perceived to be around 50 percent. This is supported by the stable industrial sector in the United States and the China.

The challenge for the white metal is to sustain the rally amid the soaring dollar and the impact brought by Brexit.

Latest comments

time to be patient and wait for small correction of 20%. in silver that is nothing. expect a rise thereafter of some 50-70% into year end and add to price during jan - may 2017.
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