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Silver Outperforming Gold; Analysts Mixed On Short-Term Momentum

By Kitco News
Monday February 17, 2014 11:39 AM

(Kitco News) - Although a lot of focus was on gold last week as the price made major technical advances, silver was actually the better performer.

Last week, Comex April gold futures advanced 4.2%; however, March silver futures rallied 7.27% with most of the gains coming on Friday as the price opened at $20.480 per ounce and closed the day at $21.421, a daily gain of 4.6%.

U.S. markets are closed Monday in honor of President’s day. However, in electronic trading, silver continued to outperform the yellow metal. As of 11:28 a.m. EST, March silver futures were trading at $21.905 an ounce, up 2.26% on the day, while April gold futures were trading at $1,328.80 an ounce up 0.77%.

Analysts have pointed out that silver is a lot more volatile than gold, however, there are some technical factors that are helping silver outperform its counterpart.

Ole Hansen, head of commodity strategy at Saxo Bank, said not only has silver’s push above its 200-day moving average helped improve the technical picture, but renewed demand for industrial metals, especially  off the back of recent positive Chinese import data, is helping silver’s fundamental outlook.

Hansen added that that the gold/silver ratio has also broken a long-term uptrend.

“This has triggered some relative value plays between the two metals,” he said.

Bob Tebbutt, of ARMOUR Asset Risk Management, agreed that the technical picture for silver is improving. He pointed out that silver built a solid base over the last two months, and then on Friday the “spring finally broke,” sending the price higher.

Although silver could continue to move higher on the back of stronger gold, Tebbut added that he is not convinced that the fundamental industrial demand will help the precious metal in the near-term.

“If the economies of the world were strong I would argue that silver would outperform gold,” he said. “I’m surprised that silver did so well last week and I’m cautiously impressed.”

In the short-term Tebbut said he thinks gold has more potential as both inflation expectations and safe-haven demand continue support the yellow metal.

“These two factors have given gold solid reasons to move higher,” he said.

Although silver has the potential to move higher, Jonathan Butler, precious metals strategist at Mitsubishi Corp., said in a research note published Friday that because of silver’s recent strong performance there could be some profit taking.

Looking at the long-term, over the next two years, Tebbutt said that he would expect silver to eventually outperform gold as world economic growth picks up and the industrial demand for silver improves.

By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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