Precious and base metal prices all rebounded today and among them silver is shining brightly. Silver’s dual roles as a precious metal and an industrial material makes it more appealing during times when economic activity is expected to rebound. Following the recent developments of vaccines, expectations over a sharp recovery in demand has helped to fuel a big rally in risk-sensitive commodities as well as commodity dollars and emerging market currencies. As well as other industrial uses, the ongoing drive towards cleaner energy means silver will also likely find support from the solar energy sector. China has promised to go carbon neutral by 2060, while many European countries have set themselves much tighter deadlines. Meanwhile, Chinese data has already been recovering and the latest industrial production figure released overnight continued to show recovery is ongoing. So, silver should remain supported from a macro point of view.
Indeed, silver has been holding its own much better than gold since both metals topped out in August, as the gold-silver ratio broke down with investors evidently choosing the grey metal due to its industrial uses rather than for haven purposes.
In recent weeks, silver has been trying to carve out a bottom around the $23 handle and following the sharp rebound at the start of the year, it has spent the past couple of weeks in a relatively tight consolidation below its bearish trend line. This bullish consolidation suggests to me that the metal is potentially gearing up for a big breakout above the $25 handle:
Source: ThinkMarkets and TradingView.com
If so, the immediate objective is at $26, which is also a longer-term resistance level. But I wouldn’t be surprised if silver goes on to make new highs in the days to come given the length of the consolidation and the big turnaround earlier in the year.
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