Silver Rides Gold’s Coattails to Push Past US$18

The silver price finally broke through the US$18 per ounce level on Tuesday (August 27), thanks to ongoing US-China trade war concerns and support from gold’s recent rally. 

Aside from the trade war, factors such as last month’s interest rate cut have led to increased demand for the yellow metal. Market watchers believe the cut shows that US and global economies are weakening, and both issues have silver following gold’s lead.

“It’s obvious that the US-China trade dispute is a big driver for gold right now. But I think silver’s significant outperformance is a clear sign that monetary concerns are also sparking demand, and that the rally will be a long-term, secular move as a result,” Brien Lundin, editor of Gold Newsletter, told the Investing News Network via email.

“A good rule of thumb is that if gold is rising and silver is underperforming, then gold’s rise is based on geopolitical, or safe haven, issues. If gold is rising and silver is outperforming, however, it’s a signal that longer term, monetary factors are fueling the move,” he added.

During Tuesday’s session, investors turned to precious metals in an attempt to soften their fears of a possible recession following disappointing US economic data.

Speaking about silver’s positive price move on Tuesday, Brian Leni, founder of Junior Stock Review, shared Lundin’s sentiment on the rally.

“In my opinion, the main reasons for silver’s appreciation in price are the same as gold; however, because silver has a component of industrial demand, its market dynamics are much different,” he said. “The biggest difference lays in the silver market’s volatility. Historically, silver outperforms both to the upside and the downside depending on the direction of the market.”

In terms of where the silver price may go from here, Lundin believes that investors won’t have to wait long for it to hit US$20.

“Silver is being driven by gold, which is an encouraging sign in that this fact confirms that one of the primary drivers of the gold rally is concern over the future values of fiat currencies,” he said. “At this rate, it won’t be long before the US$20 level starts to act like a magnet, and I would not be surprised to see silver breach that benchmark before November.”

Leni also thinks that US$20 is likely a safe bet in terms of any sort of potential price prediction.

“I believe silver will follow much of the same course (as gold), but is more volatile. I would guess that (it will reach) US$16 on the downside and break US$20 on the upside, which may be conservative,” he said. “Overall, I think the trend of escalating precious metals prices will continue moving in 2020.”

Although all eyes are currently on precious metals prices, Leni shared some advice that market participants may want to heed when exploring the resource space.

“Unless you are trying to profit by trading the actual metal, it isn’t worth putting too much stock into price predictions,” he said. “In my opinion, investing in junior resource companies should be done using the current price for valuations, not some future predicted price. The best metals traders in the world hedge their bets … because they know they can’t predict where they are headed with any real consistency.”

As of 4:30 p.m. EDT on Tuesday, silver was changing hands at US$18.15 per ounce.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.