In September the price of silver rose above $32 an ounce, the highest level since 2013. The factors behind this sharp increase there were many, explains Peter Kinsella, Global Head of Forex Strategy at Union Bancaire Privee (UBP).
Precious metals, not just gold
First, cutting interest rates from the Federal Reserve, exceeding expectations, represented a constructive development for precious metals; Subsequent statements from the Fed have confirmed that it will continue to reduce interest rates, and this is a favorable development for silver.
China factor
Secondly, other major central banks have reduced interest rates, which is again very positive for silver. Thirdly, lChina has announced a series of stimulus measures which include targeted supports for the real estate sector and lower interest rates.”
China’s announcement of stimulus measuresit could be a game-changer for silverbecause it will lead to an increase in risk asset prices in the coming months.” Silver’s correlation with this type of asset “is well known and the generally constructive outlook for gold now makes silver’s high beta relative to the yellow metal more evident.
New silver rush
Crossing the $32 per ounce threshold is very important because it means that silver has gone beyond strong technical resistance levels and this opens the possibility of an increase towards levels of at least 34 dollars per ounce in the short term.” Longer term, “we believe silver can go higher up to levels of around $38 per ouncewhich would be consistent with historical relationships between gold and silver.”
In conclusion, “silver is entering a phase of recovery compared to gold and the largely favorable context given by monetary policy means that the upward movement can continue to grow”, concludes the expert.