Silver prices surge 3% on the day as analysts point to industrial demand
(Kitco News) Silver prices are seeing a strong move ahead of the weekend, jumping nearly 3% on the day, with analysts pointing to the metal's improving industrial component and its general volatility.
December Comex silver prices were last trading at $18.33, up 2.95% on the day.
One of the main drivers pushing silver higher is an improved industrial demand outlook in light of the possible U.S.-China' Phase 1' trade deal.
"The industrial metals side has been more optimistic since the Phase 1 trade deal," TD Securities commodity strategist Ryan McKay. "Investors have been under-positioned in silver and near maxed positioning in gold. So, when the tone started to shift more positive for both precious and industrial metals, the flow seems to be going into silver."
Silver's move is starting to have similarities with palladium's rally, said RBC Wealth Management managing director George Gero.
"With a strong U.S. economy, silver is participating in industrial demand like palladium. What was holding silver back in the past is now helping silver," Gero said. "Silver has been lagging for so long. People not given it a second look until now."
Silver's technical position is also working in its favor and inviting new buyers; analysts told Kitco News on Friday.
"On the day, a break on the short-term downtrend that silver started in September and it also broke through the 50-day moving average. We are getting a bit into technical buying here and in the near-term as well," McKay said.
More chart-based buying is helping silver prices move higher, Kitco's senior technical analyst Jim Wyckoff pointed out.
"Both gold and silver have seen their near-term technical postures improve markedly this week--near-term price downtrends on the daily charts were negated, which is inviting chart-based buyers into the markets."
Also, important to keep in mind that silver is a more volatile precious metal than gold and its moves tend to be more prominent when the metals start to rally. "Silver tends to outperform or underperform on a given day if it is a positive or a negative move," McKay said.
Strong performance in silver prices means we are seeing normalizing market conditions in the precious metals space, said Saxo Bank head of commodity strategy Ole Hansen. "Silver is doing what it does best: outperforming gold when times are good," he said.
Hansen added that threats of a global recession continue to linger in the marketplace. However, investors hope that government fiscal spending, to boost economic growth, will drive industrial demand for silver higher, he said.
Gero has updated his near-term price outlook for silver to $18-$18.50 from $17.80-$18.25.
Wyckoff is projecting for silver to keep moving higher into year-end with the next significant resistance levels at $19.00 and $19.75.
"December silver futures bulls' next upside price objective is closing prices above solid technical resistance at $19.00 an ounce. Above that lies chart resistance at the September high of $19.75. My bias is that silver prices will trend higher at least into the end of the year," he said.