Silver Sees More Selling Pressure, Gold-Silver Ratio Hits New Highs
(Kitco News) - When it rains it pours, at least for the silver market, which has seen its value compared to gold fall to a new 25-year low.
While off its lows, silver is closing the week down nearly 1% with December silver futures settling Friday at $14.243 an ounce. The renewed selling pressure in silver pushed the gold-silver ratio to 86.72 points Friday.
Ole Hansen, head of commodity trading at Saxo Bank, said that low liquidity during holiday trading is the latest reason for silver’s significant underperformance; he added that it will be difficult for silver to rally in the current market environment.
“Silver continues to get beat up because of global growth concerns,” he said. “Silver is not gaining any traction despite it’s relatively value in the marketplace.”
However, some analysts remain optimistic that silver can eventually find its footing. Bernard Dahdah, precious-metals analyst at Natixis, said that his firm expects silver will be the shining star of the precious metals market in 2019.
He noted that the metal, because of its low value to gold, is starting to attract investors’ attention. What is needed to ignite the spark is higher gold prices. He said that they see the two metals as important safe-haven assets.
For 2019, the Natixis sees silver prices averaging the year at $16.50 an ounce, reaching a high of $18 an ounce. Dahdah added that the current gold-silver ratio is unstainable.
“Silver is a lot more volatility than gold, so because we are bullish on gold we are more bullish on silver,” he said.
Andrew Hecht said in a report Friday that he sees potential for silver if silver can hold important support above $14 an ounce. At the same time a push back above $15 an ounce is needed to attract fresh investment capital to the marketplace.
“So far, moves to the downside have ended with a rejection as the market has run out of the selling necessary to push the price to a new multiyear low,” he said. “The consistent rejections of the downside could be setting the stage for a surprise rally in the silver market sooner, rather than later.”
In his report, Hecht recommended that investors buy silver call options above $15 an ounce, to limit risk but still capitalize on silver’s potential.
“In the silver market, it is investment demand that drives the price over time,” he said. “A break above $15.07 could change sentiment and bring buying back to the metal.”