The “poor’s man gold” seems to be doing almost as well as its lustrous yellow cousin these days. But charts show that silver’s run-up in the shadow of gold’s rally will be a volatile one, and one for which investors must have the stomach if they wish to see more gains.
After being trapped in a woefully tight range through the third and fourth quarters of last year—where the daily move was often no more than a few cents—silver futures on the Comex division of the New York Mercantile Exchange have finally broken through the key $16 per ounce resistance.
While it starts February at a slightly lower level than a year ago, Thursday’s peak of $16.198 is silver’s best price in over seven months. And the back-to-back gain of nearly 13 percent between December and January is its best winning streak in two years. Year-to-date, the metal is up just over 2 percent.
In comparison, benchmark gold futures on Comex hit nine-month highs of $1,330.15 an ounce on Thursday, finishing January up for a fourth straight month, which gave the market an annual gain of just over 3 percent.
That puts silver’s performance at Number Two overall in the precious metals bucket, besting even recent outlier palladium which briefly became the world's costliest metal (for prices and returns of relative precious metals as well as other commodities, click here and go to “performance”).
Yet, near-term charts aren’t encouraging for silver, which is used in a wide array of industrial applications from medicine to solar cells, computer touch screens, as well as jewelry and tableware.
Investing.com has a “Strong Buy” for silver on its daily technical outlook. But it has a strong Level 3 Fibonacci resistance for the metal at $ 16.279. At that target, silver may be poised for a gain of just about 0.5 percent before coming under selling pressure.
That seems to align perfectly with a forecast this week by analysts at fxstreet.com who said silver seemed caught between two conflicting chart moves, both of which required some form of correction. Their report added:
“Regardless of which scenario plays out eventually, the conclusion is almost identical. The most sizable correction in silver is most likely to unfold within the next few weeks. Most sizable refers merely to the biggest price retracement since November 2018.”
“All in all, it is probably not the right time to chase the allegedly departing train to the upside right now. The technical pattern in silver implies an upside resolution of that correction. Hence, investors are probably better off focusing on buying the dip.”
A more bullish Bloomberg survey of 11 traders and analysts this week said silver could spike to $17.50 an ounce from short supply, with miners avoiding new projects amid global economic uncertainty. About 26,000 tons of silver is expected to be produced this year—the least since 2013—the Bloomberg report said, citing estimates by Robin Bhar, a London-based analyst for SocGen.
Canadian precious metals trading company Kitco, in a posting this week, projected mixed outlooks for silver this year.
Peter Fertig at U.K.-based QCR Quantitative Commodity Research Ltd was most bearish, projecting a low of $12.75 and an average price of $14.90.
Hans-Günter Ritter of Heraeus was most bullish, forecasting a $20 high and a $17 average.
Rhona O’Connell, an independent analyst, predicted the highest average price at $17.55.
“Silver remains torn between deciding whether it is an industrial or a precious metal. The industrial fundamentals remain unprepossessing and gold is likely to be the key driver this year. On that basis, and given that the vast majority of silver’s fundamentals are price-inelastic, a narrowing of the gold:silver ratio is foreseeable, although it is not likely to be by much.”
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