Analysts are watching to see if the silver price breaks above $25.50 next week – KITCO

(Kitco News) – With the gold market expected to consolidate near recent highs, it could be silver’s turn, according to some analysts, as investors look to other areas of the precious metals market. He says he sees value in

While gold has seen some bullish momentum this month, the silver market has been relatively calm. However, there are some signs that investors are finally starting to pay attention to the market, with the gold-silver ratio expected to end the week at its lowest level so far this year. The ratio is currently trading around 85.50 points, a significant drop from 89 points at the beginning of the week.

Currently, it takes 85.50 ounces of silver to match the value of one ounce of gold. This ratio has historically hovered between 50 and 60 points. The decline in this ratio comes after silver prices ended the week near a three-month high of more than $25 an ounce.

Silver futures for May contract were trading at $25.440 per ounce, up 3.6% from last week. At the same time, April gold futures are currently trading at $2,161.10 an ounce, down 1% from last Friday.

With gold and copper prices rising, the silver market is getting the best of both worlds. Copper ended the week at a 10-month high, with prices above $4 per pound.

Many analysts say the strong buying in silver will need to continue next week for the precious metals market to maintain its current bullish momentum.

Michele Schneider, director of trading education and research at Market Gage, said that while she is bullish on gold and silver in the near term, silver remains an attractive inflation hedge because of industrial demand.

“Questions remain as to what is behind this rotation into silver,” Schneider said. “Is silver gearing up to hedge against some kind of massive second wave of inflation? Or is silver looking ridiculously cheap while gold is above $2,100 here? Are you being run away from lower-ranked contractors?”

While both factors may be at play, Schneider said he expects silver prices to rise before reaching its full potential.

“We have a near-perfect scenario where people who haven’t jumped on gold yet, it’s not too late. They can jump into miners and keep staring at silver. Silver is an ounce. Is it possible for it to go up to $35 or $40 per month, absolutely?”

Although silver has room to rise, some analysts are warning investors to exercise some caution as the market approaches overbought territory.

“In the silver market, the hurdles for a subsequent CTA purchase program are very thin, with a series of trend signals around $25.50/oz, risking the algorithm’s positioning being raised to an effective ‘max long’” TD securities analysts said in a note. Friday. “However, beyond this potential buying program, algorithmic buying depletion appears to be imminent. This, combined with the warning signals in our real-time demand indicators, suggests that silver prices are nearing regional highs. suggests.”

Carsten Fritsch, a precious metals analyst at Commerzbank, said silver-backed ETFs saw significant inflows of 600 tonnes in Monday’s trading alone, indicating that silver is starting to attract significant investor interest. It was the largest single-day increase since January 2021.

“This represents a sudden reversal of year-to-date outflows,” Fritsch said in a note. “ETF investors may view silver as a cheaper alternative to gold. In contrast to gold, silver is still a long way from reaching all-time highs. We don’t expect this to happen in the near future, but we think silver has significant upside potential. We raise our year-end forecast to $29. However, this means that silver should also complement gold’s position.”

There’s still plenty of room for gold

While silver remains an attractive value play in the precious metals sector, Schneider said gold remains in the market as it maintains initial support above $2,150 an ounce, the resistance line from the December rally. said there is still plenty of potential.

Despite the rally, Schnieder said gold still looks cheap compared to the stock market. He noted that the Dow Jones Industrial Average is up considerably from its lows after the Great Financial Crisis in 2008.

“Gold looks cheap compared to its growth potential. Now, when you switch from gold to silver compared to stocks, stocks become really, really, really horribly cheap,” Schneider said. .

Gold and silver have plenty of room to rise, but analysts say the precious metals sector could see some volatility next week ahead of the Federal Reserve’s monetary policy meeting. Warning the house.

At next week’s meeting, it will present its latest economic forecasts and interest rate forecasts, also known as the “dot plot.”

This week’s higher-than-expected inflation poses a bit of a problem for the Fed, which has indicated it intends to cut interest rates this year, but it needs to be confident that inflation is heading back toward its 2% target.

Economists at Capital Economics said they expected the U.S. Federal Reserve to signal that it would consider cutting interest rates in June. At the same time, we expect the dotplot to continue to suggest three rate cuts this year.

Schneider said economic data is starting to weaken, potentially forcing the Federal Reserve to shift its focus from inflation to supporting the economy. This will be positive for gold and silver, she said.

Schneider said he expects the Fed to speak from both sides and signal a rate cut later this year, but reiterated that it remains dependent on data.

In this environment, anything that suggests an impending rate cut would be bullish for precious metals, he said.

“The Fed intends to maintain the status quo until we have further evidence that inflation is getting out of control,” he said. “They are looking at possible cuts, but whether it’s June or July, it doesn’t really matter.”

Commodity analysts at Commerzbank said gold prices could hit a new record next week if the Fed signals at its meeting that a rate cut is imminent.

In other central bank actions, dovish comments from the Bank of England and the Swiss National Bank could support gold prices in global currency markets.

Next week’s economic data:

Monday: Monetary policy decisions of the Bank of Japan, Monetary policy decisions of the Reserve Bank of Australia

Tuesday: U.S. housing starts and building permits

Wednesday: Federal Reserve Monetary Policy Decisions

Thursday: Swiss National Bank’s monetary policy decisions, Bank of England’s monetary policy decisions, weekly unemployment insurance claims, Philadelphia Fed manufacturing industry survey, preliminary PMI, US used home sales.