(Kitco News) - Silver is finding some solid support after being dragged down by gold’s sharp two-week selloff; however, some analysts have said that investors should not rule out potentially lower prices in the near term.
The silver market shone bright for a brief period, rising to a two-year high to nearly $30 an ounce as gold prices pushed to record highs above $2,400 an ounce, but the selloff in the last two weeks has taken its toll on the white metal.
June silver last traded at $26.50 an ounce, down 11% from its recent highs. In traditional fashion, silver has also underperformed gold as the yellow metal is down roughly 6% from its all-time highs.
The gold-silver ratio is trading at 87 points, sharply higher than its recent lows below 82.
Alex Kuptsikevich, Senior Market Analyst at FxPro, said the selling pressure has created significant technical damage in silver price action.
“The sharp dip from the $27 level marked an exit beyond the corrective pattern, as the price dipped under 61.8% of the rise since late February,” he said in the note. “It is not the first time since 2020 that Silver has tried to break above $30. A demonstration of resistance strength at this level is likely to discourage buyers, who have never managed to get the same breakout of the highs as we have seen in gold.”
While $26.50 appears to be holding as initial support, Kuptsikevich said that the level he is watching is around $25 to $25.50.
He said a break below this and investors will face a “whole range of negative scenarios.”
The selling pressure in gold and silver comes as markets shift their expectations on U.S. monetary policy and push back on the time of rate cuts from the Federal Reserve.
It is now expected that the central bank could maintain its restrictive interest rates through the summer, which in turn could weigh on economic activity and industrial demand for silver.
In a recent comment to Kitco News, Julia Khandoshko, CEO at Mind Money, said she is not optimistic about silver as she views it more as an industrial metal than a monetary hedge.
She said that she does not recommend buying silver now.
“Silver and gold should not be put in one line and compared: silver is about economic cycles, about the same thing that platinum is about, and gold is about whether we believe in the currency system or not,” she said.
However, Khandoshko said that silver could be an attractive investment when the Federal Reserve starts to cut interest rates, which will support economic growth.
“Silver is not perceived as a substitute for fiat currency; it is just a resource. If we have a look at all these commodities, they could be in better shape right now because their price schedule is cyclical: when we have an economic downturn, they are cheap; when the economy is in recovery, they are expensive,” she said. “There is an obvious economic downturn now, so they are performing poorly. After the future rate cut, we can expect economic growth. And then, the time for silver will come.”
However, some analysts still see bullish potential for silver.
In a recent commentary, Fawad Razaqzada, Market Analyst at CityIndex.com, said that silver still looks strong despite the recent selloff.
“The breakout continues to hold above the $26 breakout level,” he said.
After three years of consolidating, Razaqzada said silver’s recent breakout was significant. He added that if technical support holds, silver still has a chance to outperform gold in the coming months and even push above $30 an ounce.
“The longer prices remain above $26, the path of least resistance remains to the upside,” he said.
In a recent interview with Kitco News, Robert Minter, Director of ETF Strategy at abrdn, said he is bullish on silver as it sees the best of both worlds in solid copper and gold prices.
“If you like copper and gold, then you have to like silver, and we expect it will outperform both in the long run,” he said.
