iNVEZZ.com, Tuesday, June 24: Comex silver futures for July settlement climbed by as much as 1.3 percent to $21.17 a troy ounce today – the highest level since March 18 – but later gave back some of their gains to trade at $21.015 as of 13:23 BST. As can be seen from the chart below, the precious metal’s 14-day relative-strength index is significantly higher than 70 and has been since June 19, which indicates that the market may be overbought. The price is poised to finish its twelfth straight session of gains today – it’s longest rally in at least four months. The white metal is up 8.2 percent in the year-to-date.
Silver has increased in value by more than six percent since June 18 when the Federal Reserve announced it expected the historically low interest rates in the US to remain appropriate for a “considerable time” even after the central bank brings its monetary stimulus programme to an end.
“Our view on silver this year, and further out, is that it should eventually perform better than gold. Silver's links with industrial activity puts it in a better position to benefit from a global recovery than gold. Although the improvement in the supply and demand balance is expected to be modest, the expectation is that this will nevertheless act as a trigger for investors to start looking at silver again. Lately, participation in the silver market has notably improved, with the gold:silver ratio moving sharply in silver's favour. Volumes on the Shanghai Gold Exchanged last Friday jumped to 5,826 tonnes, the highest daily turnover since the peak in April last year. Volumes in Shanghai so far this week have remained elevated. On Comex, silver short-covering dominated after gross shorts reached a record level. As a result, spec length increased by the most since mid-February,” UBS AG researchers wrote in a note today. Other analysts and market participants place more weight on investment demand as a potential catalyst for silver prices to rise.
In the week to June 23, holdings in silver-backed exchange-traded funds dropped by 1.17 million ounces to 621.82 million.
The UBS researchers also suggested that demand for silver from the solar sector could be one of the factors that contribute to further price increases – albeit to a moderate extent. In its Silver Yearbook 2014, CPM Group estimates demand for silver for use in solar panels will reach 78.1 million troy ounces this year, up from 69.5 million in 2013.