Silver price extends rally to reach four-month high on safe haven bids

Speculation ahead of ECB meeting supports precious metals

Silver price extends rally to reach four-month high on safe haven bids

The price of silver has reached a fresh four-month high today, driven by safe haven demand amid concerns over a slowdown in the global economy. Speculation ahead of tomorrow’s European Central Bank meeting also supported precious metals.

Silver for immediate delivery had jumped 33 cents, or 1.88 percent, to $18.30 as of 06:14 GMT, and was trading over 11 percent above its 50-day simple moving average of $16.37. The precious metal was trading at its highest level since mid-September after managing to break above $18.

Silver has soared over 17 percent since the beginning of the year on concerns over a downturn in the global economy, with the International Monetary Fund the latest organization to cut estimates after it revised down its 2015 world outlook. Yesterday, the fund cut its forecasts for 2015 by 0.3 percentage points to 3.5 percent, Meanwhile, China, the world’s second largest economy, reported that its gross domestic product expanded 7.4 percent in 2014, the weakest pace since 1990.

The Bullion Desk cited HSBC Securities analyst James Steel as saying that while further safe haven gains in precious metals were possible, a consolidation in prices may be needed given their sharp spike since the beginning of the year. In his view “rallies of such nature may put a strain, if not discourage, price sensitive emerging market buyers”.

The price of silver for March delivery had advanced 31 cents, or 1.7 percent, to $18.32 as of 06:23 GMT. Scotiabank wrote in a report from yesterday that both trend and momentum indicators are bullish. According to the bank, resistance lies at the 200-day moving average of $18.41, while support is expected at $17.00.

Reuters quoted a note from Rajneet Kaur, a commodity strategist at ANZ, as saying: “Precious metals were stronger […] as speculation grows that the ECB will boost economic stimulus”. Market participants are focusing their attention on tomorrow’s ECB monetary policy meeting, which may see the announcement of a quantitative easing (QE) asset purchasing programme.

Based on the two most actively traded COMEX contracts, with a total volume of trade in gold and silver of 34,550 contracts as of 06:23 GMT today, the gold:silver ratio was at 71.11. Last Wednesday the ratio closed at 73.00.

As of 07:36 GMT, Wednesday, 21 January, Silver's price is $18.26.

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