Silver prices surged to a new high in the first session of the week, as investors stepped up speculative positions amid scarce global supply and growing expectations that the Fed will soon cut interest rates. Gold prices, on the other hand, are almost flat.
In the second session, silver once hit 57.86 USD/ounce, an all-time high, after increasing by nearly 6% and setting a record for the last weekend session. The metal has been rising steadily for six sessions, doubling its value since the start of the year well above golds increase of about 60%.
Silver supply continues to tighten. A record amount of silver was moved to London in October to alleviate the scarcity, but put pressure on other exchange centers. inventory at the Shanghai Financial Exchange has fallen to its lowest level in nearly 10 years, while the cost of a one-month deposit is still unusually high.
The global shortage, which originated from the London supply tightening, is still very clear, said Daniel Hynes, commodity strategist at ANZ Group Holdings. As gold is taking a break, investors are turning their attention to silver.
The market is now betting almost certain that the Fed will cut interest rates by 0.25 percentage points, based on weak signals from the US labor market and a series of dovish statements from Fed officials last week. The US government's delay in releasing economic data due to a six-week closure further reinforces expectations of policy easing a factor that often supports non-yielding precious metals such as gold and silver.
The recent price increase has a strong speculative element, as the strong increase attracts more short-term capital flows, said Mr. David Wilson, Director of Commodity Strategy at BNP Paribas. Gold/sion has fallen to nearly 70 and investors are watching how expensive silver is.
The market is also watching for the possibility of the US imposing tariffs on silver, after the metal was listed as an important mineral by the US Geological Survey last month. The risk of sudden taxation makes exporting enterprises hesitant, making the prospect of loosening supply further off.
Investors' interest in silver is still heating up. Capital flows into physical silver ETFs accelerated in November, after a profit-taking period in October. Silver mining stocks also increased sharply: Sun Silver Ltd. increased by 21%, Silver Mines Ltd. nearly 13%, China Silver Group Ltd. in Hong Kong (China) increased by 14% before adjusting slightly at the end of the session.
The global commodity market is still dealing with the consequences of trading disruptions on the CME floor over the weekend, causing many traders to call brokers directly to prevent portfolio risks.
