This week silver is going to have a great historical journey. Traders will remember it for the stellar performance and the breakdown of the price denominated in dollars in the spot, futures, and physical markets. This has ignited everything from gold and silver mining stocks and indices to ETFs and sparked increased interest in the financial media, as well as institutional and retail investor bases.
The white metal closed last week at $19.34, standing at a maximum in 4 years. The spot price of silver took off on Monday. It traded at $24.15, with a weekly gain of more than 18%. Major fireworks exploded on Tuesday. Spot prices increased by approximately 12.5% to the $22.5 range, a new maximum of six years. After a brief consolidation, the trading on Wednesday involved a successful attempt and hit $23, which is near the seven-year high. This is the level that the metal found during its last major escalation, in September 2013.
Silver/gold ratio heading back to the bottom of 2011
Notably, at current levels, the price of silver has now nearly doubled from its annual low of $11.9 recorded on March 19, in the midst of wider financial market twists and turns.
One can attribute the current increase in the metal’s prices to several factors. As global economies reopened after easing restriction measures because of the coronavirus pandemic, industrial demand increased. Strong demand in physical silver, bullion, and silver ETFs have grown. At the same time, the silver mines supply has been interrupted.
In the middle of March, when the metal lost its value, the silver-gold ratio reached its highest level in modern times. However, there seems to have been a change in sentiment in these locations. September silver futures show that the ratio has decreased from 124 to 82.71. This is a reminder from investors that silver, like gold, is a monetary metal and a storage of value.
On a technical basis, the price of silver in US dollars is rising mainly because it has momentum. This attracts the interest of investors and the media, which in turn attracts more interest from investors. Similarly, the rise in the price of the metal also fuels interest in the price of gold, and vice versa.
Andrew Hecht, an analyst at Seeking Alpha, states that the silver/gold ratio has decreased over 40 points. It could be going back to the 2011 levels when it had been 38:1.
COMMENTS