Silver Is the Metal to Watch as it Plays Catch-Up with Gold

(Frabruary 15, 2018 - by Neils Christensen)

While all eyes have been on gold’s massive rally Wednesday, the bigger play to come, according to some analysts, could be in silver.

April gold futures, settling the session at $1,358, up more than 2% on the day, is seeing its biggest percentage gain in nearly two years. At the same time, silver prices saw a 2% rally as March silver futures settled the session at $16.878 an ounce. But, to put the move in silver into perspective, the percentage gain was less than the move recorded two days ago.

With gold and silver moving in tandem, the gold/silver ratio, according to Kitco.com, has held steady at 80, holding near a multi-year high. According to some analysts, the historical average for the gold/silver ratio is around 60. Traditionally, silver is more volatile than gold, meaning that it has great price swings outperforming on the upside and underperforming on the downside.

“Silver is not outperforming gold today because gold is being driven by technical factors,” said John Weyer, director of commercial hedging at Walsh Trading. “But I don’t think you should discount silver.”

Weyer said that he could see silver outperforming gold when investors and traders start paying attention to the market’s demand fundamentals. He added that a booming global economy should lead to higher demand for silver, which has strong industrial uses.

“I think at these levels gold is overbought and silver is under-owned,” he said. “At current levels, silver has room to run to $17.60 an ounce before the market looks stretched.”

Bill Baruch, president of Blue Line Futures also thinks silver is the metal with the most potential.

He noted that gold could face significant resistance at $1,360 an ounce in the near-term.

“If you don’t own any precious metals at this point then silver offers the best value,” he said.

In the near-term, analysts say that silver needs to retake $17 an ounce, a psychological level.

“Silver’s next upside technical target is the January high of $17.555. Silver’s longer-term upside objective is $18.64,” said Jim Wyckoff, senior market analyst at Kitco.com “All of these price targets are now within striking distance in the coming days, or few weeks.”