Due to continued supply constraints and growing prospects for a US interest rate decrease, silver surged to a new preak on Monday as traders placed speculative wagers.
Gold was consistent. The white metal shot up over 6% to a record on Friday, reaching as high as $57.86 per ounce. It has surged for six days in a row and doubled in value this year, surpassing a roughly 60% increase in gold.
In order to relieve a historic strain in the largest silver trading hub in the world, a record amount of the metal entered London in October; however, this has put pressure on other hubs.
The cost of borrowing the metal for more than a month is still high, and inventories in warehouses connected to the Shanghai Futures Exchange recently fell to their lowest point in almost ten years.
“Shortages in the global market as a result of the recent squeeze in London are still being felt,” said Daniel Hynes, a commodity strategist at ANZ Group Holdings Ltd. “With gold taking a breather, it appears investors have turned their attention to silver.”
Both metals have also given a boost from growing predictions that the Federal Reserve will decrease interest rates in December.
Due to the ongoing weakness in the US labor market and the Fed officials' more dovish remarks over the past week, markets are completely pricing in a quarter-point rate cut.
The argument for reduced borrowing costs, which usually help non-yielding precious metals, has also been strengthened by the publication of economic data that was postponed due to the US government's six-week closure.
According to David Wilson, director of commodities strategy at BNP Paribas SA, "the move last week has been speculatively driven, with accelerating upside momentum attracting more and more fast money."
"The fact that the gold-silver ratio has gotten down close to 70 is important to watch," he stated, adding that investors will be keeping an eye on the price of silver in relation to gold.
The ratio shows how many ounces of silver are required to purchase one ounce of gold. Since silver was added to the US Geological Survey's list of essential minerals last month, traders are also keeping an eye out for any possible tariffs on the precious metal.
In the event that the world market tightens even more, dealers may be reluctant to export the metal due to fear of an unexpected premium in the United States.
After investors booked profits in October, following the previous peak, investor interest in silver surged last month, with inflows to physically backed exchange-traded funds picking up speed.
Monday saw an increase in silver mining stocks as well. Sun Silver Ltd. and Silver Mines Ltd. both saw increases of up to 21% and nearly 13%, respectively, in Australia. Meanwhile, China Silver Group Ltd., which is listed in Hong Kong, saw a 14% increase before reversing some of its gains.
Global markets were also taking stock after an hours-long trading outage on the Chicago Mercantile Exchange on Friday. With futures and options contracts on the Comex impacted by a data-center malfunction, some metals traders said they had reverted to calling brokers and dealers by phone to hedge their exposures.
Silver traded up at $ an ounce as of 9:26 a.m. London time. Gold was slightly changed at $ an ounce. The Bloomberg Dollar Spot Index was likewise unchanged. Platinum and palladium gained.
