Silver is one of the metals which tend to see big fluctuations. In today's economy we are facing a fragile financial system. If we ponder at the price of silver in last 5 years, the silver price usually has maintained it's position on a higher end. If considered latest reports,Silver pricing has jumped 11 percent in the first quarter of 2016 after falling 12 percent last year to its lowest since 2009.
The strong performance of Silver reflected a marked improvement in investment and speculative demand. Since we expect gold to push higher in the second quarter, we see a major hike in the prices of silver, with a three-month range of $15-18.
Silver is adamant to stay on a positive shift in the first quarter majorly because of increase in gold prices, which was a result of weaker dollar and a fall in US real interest rates amid renewed risk aversion. We believe the ratio could revert toward its longer-term at an average of 62, which can result in a considerable outperformance of silver relative to gold. Silver could surprise to the upside and reach new heights in the second quarter. Later in the year, however, we may encounter downward pressure to re-emerge for two reasons. First, the increase in monetary demand for silver in the early months of 2016 may not last, somehow because of higher prices. Second, industrial demand, which is 54 percent of total silver demand, may fall further this year after falling 4.1 percent in 2015 as a consequence of weaker industrial demand.
ETF investors have bought 745 tonnes of silver in the first quarter of the year 2016 after selling 506 in 2015, 181 tonnes in 2014 and 82 tonnes in 2013. ETF buying could however still remain steady in the second quarter as well.
• Silver saw a rift at the upper end of its growing channel at the end of June and pushed to a fresh 2016 high on July 4.The breakout pattern for sure suggests a move higher for longer. This seems to be the position of silver pricing although we prefer to remain cautious in the near term.
• On the upside, we see the next critical resistance level at the 2014 high of $22.18. On the downside, a break below the 20 DMA could result in additional selling pressure and push the precious metal back into its ascending channel, with next solid support at the 50 DMA.
DISCLAIMER: The views expressed in this blog are those of the author and may not reflect those of Jindal Bullion Limited. The author has made every effort to ensure accuracy of information provided; however, neither Jindal Bullion Limited 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 precious metal products, commodities, securities or other financial instruments. Jindal Bullion Limited and the author of this article do not accept culpability for losses and/or damages arising from the use of this publication.