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Silver and palladium prices can still go lower

Kitco News

(Kitco News) - Growing panic in financial markets continues to drag precious metals prices down across the board, but growing recession fears are particularly weighing on silver and palladium prices, according to analysts.

Monday, silver prices fell to a nearly 11-year low with many analysts saying that lower industrial demand for the precious metal is weighing on prices. Meanwhile palladium, which has been the best performing asset in the precious metals space, has dropped nearly 50% from its February all-time highs. Palladium is trading back below gold prices.

May silver futures last traded at $13 an ounce, down more than 10% on the day. June palladium futures last traded at $1,469.20 an ounce, down more than 2.5% on the day.

Although silver and palladium have lost significant ground in the last few days and weeks, some market analysts are not ruling out lower prices in the near-term.

“Silver trading below $15 definitely has a lot of bad news priced in but the question investors are asking is: ‘How bad is bad,” said David Madden, senior market analyst at CMC Markets. “The bad news can still be worse.”

Madden noted that the current market environment is irrational as investors are liquidating safe-haven assets like gold. In this environment silver doesn’t stand a chance to attract investor interest.

“Right now, the feeling among investors is that if you own an asset that isn’t cash then you need to get out,” he said.

Not only has silver’s safe-haven allure tarnished but Madden noted that recent global economic data has significantly missed already beaten down expectations. He added that as the coronavirus continues to spread, economic data will continue to weaken.

“I think we are going to see a lot more dire economic data before we hit a bottom,” he said. “That will continue to weigh on assets like silver and palladium. Palladium demand will be there after the virus is gone but right now with investors stuck in their homes they just don’t care about catalytic converters.”

Madden said that looking at China as an example, Europe is about three weeks away from “peak virus panic.” Meanwhile, the U.S. is about another three weeks behind Europe.

“When Ireland closes its pubs you know things are bad and only going to get worse,” he said.

Despite some grim expectations in the marketplace, some analysts aren’t giving up especially on silver.

In an email to Kitco News, Mike McGlone, senior commodity analyst at Bloomberg Intelligence said silver fortunes are tied with gold and with the Federal Reserve cutting interest rates in an emergency move Sunday, the yellow metal’s future looks bright.

“Gold is fundamentally bullish and more so, now that the Fed has shifted to zero rates,” he said. “Silver will follow gold and is more likely to have a sharp recovery when the stock market rebounds.”

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 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.