At present, the white metal won’t have a hard time finding bulls.
Silver futures ended a two-year peak on Monday: September contract in Chicago gained 15 cents to trade at $20.50 per ounce, the highest level hit since July 30 in 2014.
Both gold and silver have been lifted by the waning expectations of a rate hike by the Federal Reserve for 2016. Lower rates mean a weaker dollar, which buoys dollar-priced commodities. This makes them cheaper for consumers of other currencies.
Rate Hike, Impact on Metals
The market stands at a one-in-three chance of rate increase by the end of the year, but more hard data are needed to solidify this hike prospect. Such situation could only mean a continuous upward direction for the precious metals.
Meanwhile, James Steel, HSBC chief precious metals analyst, claimed that the white metal could be boosted by gold, risk-off sentiment or specifically an accommodative Fed monetary policy and negative interest rates, and rising geopolitical risk.
With that, the upsurge trend’s force may not be as strong as it has been so far this year.
“Investment demand, which has been strong this year, may cool but should remain positive,” the analyst writes. Steel claims silver will reach the $16-$21.50 per ounce level towards year end.
Technical analysts have remarked on the silver’s frequent letdown to crack resistance at $20.52. The bullish trend has had at least three cracks at this through the prior month, each failing. But with current price steady at $20.48, a break should come in soon.
Elsewhere on the Comex division of the New York Mercantile Exchange, gold traded up 0.50% at 1,366.45 as of 09:58 GMT, supported by a dampened greenback which fell due to the aforementioned fading rate hike hopes. As it stands, it is hovering above its three-week high of $1,362.00 hit last Friday.
At the same period, the US dollar index, which gauges the greenback’s strength against six other major currencies, is down 0.39% to trade at 95.38, lingering close to its five-week low of 95.34 touched late in the preceding week.
Meanwhile, investors are looking ahead to key US data later to evaluate the condition of the world’s biggest economy. Should the data prove to be strong, it may be sufficient to impose a rate increase later this 2016.
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