(Kitco News) – After a relatively slow start in the first quarter, silver is making its move, significantly outpacing gold as it trades at an 11-year high.
Just ahead of the weekend, silver prices have broken above $30 an ounce. July silver futures last traded at $30.74 an ounce, up nearly 3% on the day. By comparison, gold is trading at $2,406.20, up 0.88% on the day.
Soaring silver prices have pushed the gold-silver ratio below 80 points, and it has been trading at its lowest level since August.
According to some analysts, silver is just getting started as the precious metal has solid momentum.
“Silver does not look overheated, as it is only now entering overbought territory on the RSI on the daily timeframes,” said Alex Kuptsikevich, FxPro senior market analyst, in a note on Friday. “Last month, silver was actively added for another three weeks after the RSI entered levels above 70. A two-week pullback in the second half of April later removed that overbought area. Technically, this clears the way up.”
Kuptsikevich added that his near-term target for silver is $33 an ounce; however, he added that the precious metal could make a serious move to its all-time high of $50.
“Long-term trends are also on the bulls’ side. In the last two years, they have been able to quickly turn the price to the upside after dips under the 200-week moving average. This year, the price is successfully pulling away from that line, but the most furious part of the rally may be ahead,” he said. “Silver could be ready to repeat the growth spurt it showed in 2010-2011.”
In a recent interview with Kitco News, Michele Schneider, Director of Trading Education and Research at MarketGauge, said that silver’s value play makes it more attractive than gold.
She added that silver tends to outperform in a higher inflationary environment. Although April’s core Consumer Price Index, which strips out volatile food and energy prices, saw its first decline in six months, Schneider said it remains elevated at 3.6%.
While some economists have celebrated the drop in consumer price pressures, Schneider said they are still looking at inflation in all the wrong places.
She explained that rising geopolitical uncertainty and renewed pressure to onshore manufacturing in the U.S. will drive prices higher and weaken the U.S. dollar.
“This move in silver is telling us that we have fractures in the economy, but we don’t know how these fractures are going to manifest,” she said. “Is it going to lead to a debt crisis? Is the Fed going to have to lower rates? Either way, we should expect to see higher inflation.”
Schneider said that the $30 level represents an important resistance point for silver.
“If silver is going to hold 29 and get through 30, I don’t see any reason why we can’t get to 35 eventually and 40,” she said.
However, not all analysts are convinced that silver is thriving as a monetary metal.
In a comment to Kitco News, Julia Khandoshko, CEO at the European broker Mind Money, said that she sees this move in silver as a reflection of the broader bullish momentum in commodity markets.
Silver’s rally comes as copper prices have pushed to all-time highs above $5 per pound.
“Today, all metals, including silver, are growing for a simple reason—cautious sentiment on global economic growth,” said Khandoshko. “If we look at commodities charts, we can see they have a cyclical price trend: when there is an economic downturn, they are cheap; when the economy is recovering, they rise in price.”
Khandoshko added that she prefers gold over silver as a monetary and safe-haven hedge.
Ole Hansen, head of commodity strategy at Saxo Bank, noted the breakout could lead to sustainably higher prices. He added that platinum prices are also making a move.
“Finally, we have a rally firing on all cylinders,” he said. “The gold-silver ratio is not a million miles from its long-term average, so silver strength could mean general precious metal strength.”
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