Silver on track to eclipse its best closing price of $20.60 an ounce reached on July 29, 2014
Silver futures traded sharply higher Monday, suggesting growing demand for gold’s sister metal, which is in position to score its best settlement in two years.
Gains for silver and gold futures sharpened as economic reports pointed to manufacturing growth in the U.S. that was more subdued than Wall Street hoped.
September silver SIU6, +0.85% gained 24 cents, or 1.2%, to trade at $20.59 an ounce, after gaining 0.8% Friday.
July ISM Manufacturing Index fell to 52.6 from 53.2 in June, which indicated that manufacturers grew a slightly slower rate in July. Although the index is still at its second-highest reading since June 2015, some traders and investors may view the data as sufficient to give the Federal Reserve pause in raising interest rates at its next policy meeting in September.
Meanwhile, spending on construction tumbled 0.6% in June, with declines spread evenly across the private and public sectors.
Silver’s current level puts it on pace to reach its best close for a most-active contract since July 2014, according to FactSet data.
“Silver has come back into relative value [with gold] over the last 30 years,” said Ross Norman, chief executive of London-based metals broker Sharps Pixley Ltd.
The precious metal will continue to show bullish trends, Jim Wyckoff, senior analyst at Kitco.com said attributing it to weakness dollar and lackluster gross domestic product report which were released Friday “leading to notions that the Fed may not be able to raise interest rates.”
Gold and silver have enjoyed a healthy bounce over the past several trading sessions due to the Fed’s go-slow approach to hiking interest rates, which has supported precious metals, which don’t bear a yield. The prospect of lower rates tends to weaken the dollar and that factor can be a boon for commodities priced in dollars, making them cheaper fro buyers using other currencies.
Julian Phillips, founder and contributor to GoldForecaster.com, said lower liquidity and volumes in silver can account for some of that metal’s sharper bounce relative to gold, since thinner volumes can result in more intense price swings.
Meanwhile, gold futures GCZ6, +0.17% ) picked up $1.90, or 0.1%, to trade at $1,359.50 an ounce, after trading in negative territory earlier in the session.
“Gold needs to break through $1,380 [an ounce] to race higher, but silver is moving 5+ % when gold is moving 1.4%,” explained Phillips. He said because “the silver market is so much smaller and less liquid than gold is. This accounts for the more elastic and volatile behavior.”
One measure of the difference in moves between gold and silver is showing growing appetite for silver compared with gold. The gold-to-silver ratio stands at about 1 to 65, Norman said, with a single ounce of gold worth about 65 ounces of silver at current trading prices.
The ratio can serve as an indicator to determine when to buy or sell the precious metals. About five years ago, it was closer to 35, while the historical average is around 15.
Elsewhere in metals, high-grade copper for September delivery HGU6, -1.17% lost 2 cents, or about 1%, at $2.20 a pound, October platinum PLV6, +1.07% rose $13.90, or 1.2%, to $1,164.70 an ounce, while September palladiumPAU6, +1.03% climbed $9.30, or 1.3%, to $719.10 an ounce.