Silver Shines: Precious Metals Looking Good

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Includes: GLD, GTU, IAU, OUNZ, PALL, PHYS, PPLT, QGLDX, SGOL
by: MetalMiner

Original Post

By Raul de Frutos

Silver prices skyrocketed on Monday, hitting an 11-month high.

Silver price hits 11-month high

The silver price hits 11-month high. Source: MetalMiner analysis of @StockCharts.com data.

It is difficult to find a fundamental reason for such a price increase. It seems like silver is simply catching up with gold. Gold surged to a one-year high back in February and, ever since, the yellow metal hasn't moved much, as if it was waiting for silver to close the gap.

Gold to silver ratio falls

The gold-to-silver price ratio falls. Source: MetalMiner analysis of @StockCharts.com data.

And the gray metal has done so. The gold-to-silver ratio has come down to more normal levels after rising to multiyear highs in February when gold prices surged.

Gold Gets Company

The truth is that gold is not moving up alone anymore, since this is not just about investors looking for safe haven. Commodity markets are showing the first signs of recovery.

A weaker dollar and rising oil prices in Q1 lured investors into commodity markets this year. Not only gold but the rest of the precious metals, as dollar-denominated commodities are getting a boost over the past few months.

Platinum and Palladium Join the Party


Platinum (in red) and Palladium (in blue) recovering

Platinum (in red) and Palladium (in blue) are also recovering. Source: @StockCharts.com.

Will the Uptrend in Precious Metals Continue?

That will strongly depend on what the dollar and oil prices do from now on. The recovery in oil prices since February is encouraging, especially since prices are managing to hold their value this week, despite bearish news after major oil producers supplying nearly half of global output ended their meeting in Doha, Qatar, over the weekend without reaching an agreement to cap production.

If oil prices continue to climb despite the bearish news, that would be a bullish development, suggesting that underlying supply/demand fundamentals might, indeed, be improving.

Dollar weakens in 2016

The U.S. dollar weakens in 2016. Source: MetalMiner analysis of @StockCharts.com data.

Another key factor to watch is the U.S. dollar, which will likely move in the opposite direction to oil prices. The interest rate stimulus policies that major world banks take through the year will be decisive in the value of the dollar and the rest of world currencies.

The U.S. dollar index is approaching new key support levels that if broken, would be another indication that commodity markets are set to continue improving.