Silver Stuck In Neutral, Waiting For A New Catalyst - Ira Epstein
(Kitco News) - Although silver’s freefall appears to have ended and prices are holding above their August lows, the precious metal is still struggling to find a new direction, according to one market analyst.
In a report published Tuesday, Ira Epstein, director of the Ira Epstein Division of Linn & Associates, Inc., said that in this neutral price environment, he sees silver as a short-term trading vehicle rather than a long-term investment.
Epstein's comments come as silver has not been able to attract any buying momentum as prices hover at the bottom end of their trading range near one-week lows. December silver futures last traded at $14.475 an ounce, up 1.04% on the day after receiving a boost from a major sell-off in world stock markets that have spooked traders and investors around the globe.
“The higher U.S. dollar, higher interest rates and trade war uncertainty with China have taken a toll,” he said.
Not only is silver unable to push higher but it continues to underperform against gold. Kitco.com shows the gold/silver ratio just off its recent nearly two-decade highs, last trading at 83.60 an ounce.
“The gold/silver ratio still has prices over the 18-Day Moving Average of Closes, which means that even with silver having gained on gold in recent weeks, silver is not trending higher against gold. This ratio would have to move under the 18-Day Moving Average of Closes for me to say that and it isn’t,” said Epstein in his report.
Not only is silver suffering from lackluster demand for precious metals but it is also following weak price action in base metals as copper has dropped nearly 1.5% on the day. Silver is also considered an industrial metal as the sector makes up 50% of the metal’s demand.
Epstein said that he expects silver’s industrial demand to determine the metal’s next significant trend. With that in mind, he added that investors need to pay close attention to the ongoing trade war between the U.S. and China.
“If the U.S. and China somehow open ‘real’ dialogue that should be a bullish event for silver. As it is, the earliest I see that possibility is in November, when President Xi of China and President Trump meet at an annual gathering of heads of state,” he said. “Unless China gives ground on U.S. intellectual property rights, President Trump will in my opinion not make a trade deal with China. What’s worse, is that if these two heads of state don’t make headway, the rest of the U.S. tariffs will hit, which I don’t see being bullish for silver.”