Silver’s burst of momentum to cap biggest weekly gain in a year

(April 22, 2016 - by Eddie van der Walt and Jasmine Ng - Bloomberg)

Prices are up 24% this year. 

Silver is having a run for the record books.

This week is set to be the best in almost a year and marked the beginning of a new bull market for the metal with a reputation for being gold’s more volatile cousin. Prices have rallied more than any other metal this year after three years of losses for the white metal. Assets in exchange-traded funds are near a record high.

“We think momentum could carry silver,” Deutsche Bank analysts including Grant Sporre wrote in a research report on Friday. The metal “tends to be a late cycle play in the precious metals.”

Silver for immediate delivery rose 1.1% to $17.1875 an ounce at 12:04pm in London, according to Bloomberg generic pricing. Prices are up 24% this year. Gold was little changed at $1 245.91 an ounce.

Bullish Forecasts

Silver may approach $20 an ounce in the near term, according to Deutsche Bank. Some analysts have said prices are simply catching up to the rally in gold earlier this year, while others point to expectations for faster economic growth, which benefit silver because it has more industrial uses than gold.

Silver has outperformed gold in nine of the past 11 trading sessions. The gold-to-silver ratio, which measures the price of one divided by the other, has fallen 72.5, the lowest since October.

Holdings in ETFs backed by silver rose for a fourth day to 19 962.2 metric tons, according to data compiled by Bloomberg as of Thursday.

Gold will drop because the Federal Reserve may increase interest rates three times this year, according to Goldman Sachs Group. Recent and upcoming US data, supported by easing financial conditions, will likely result in a more hawkish Fed, higher yields and a stronger dollar, which may put downward pressure on prices toward a near-term target of $1 100, analysts including Jeffrey Currie and Max Layton, wrote in a report dated April 22.

The Federal Open Market Committee is scheduled to meet April 26-27, and investors see zero probability of high interest rates.