Silver finally joined the gold party and the metal markets are thriving. All eyes are now set on silver as its prices started the week with huge follow-through buying after a convincing May 15 breakout session.
In a comment to reporters, the chief market strategist at Blue Line Futures, Phillip Streible, said that an ideal storm of increased investment demand and dwindling supply is expected to continue to push the silver prices higher.
The May silver prices last traded at around $17.51 an ounce representing an increase of 2.5% on the day. May 17’s rally comes after silver’s 5.5% jump on Friday. Notably, silver futures are trading at their highest level since late February. The metal has now recovered all of its losses from the abrupt March selloff.
Streible said that the May 15 rally gained new momentum after the release of the Federal Reserve’s industrial production data for April. That report indicated that industrial production dropped 11.2% in April. That represented the most considerable drop in the report’s 100-year history.
One of the report’s key component revealed that mining output that includes silver and gold production plunged 11.2% the sharpest monthly loss in history. Streible explained:
“Nobody really talks about the mining numbers in this report, but someone was obviously watching it. The data points to tightening physical supply. Silver prices are going higher because the market is getting a lift from all different angles.”
Silver is Rising
With the silver prices rising back above $17 an ounce, head of the commodity strategy at Saxo Bank, Ole Hansen, said that the next key resistance level to consider is $17.50 an ounce. He also said that silver has more room to rally since speculative interest in the metal has been dropping since early March.
Investors shed their bullish silver bets as the COVID-19 pandemic was wreaking havoc throughout the entire global economy. Hansen added:
“We have to contemplate the risk of a second wave of the virus wave in the second half of the year; together with a developing Trump versus China blame game. With these developments in mind, we see the risk of renewed stock market weakness, a stronger dollar; and Japanese yen on safe-haven demand… precious metals look set to rally further on safe-haven and diversification demand.”
Even though speculative investors have been reluctant to hold silver assets, Hansen stated that investor demand in the silver-backed exchange-traded products remains huge. He added:
“Apart from a small dip in March, ETF investors have been continued buyers of silver ETFs since January. Total holdings have reached a record 98 million ounces.”