Silver was at $15.455 an ounce in Asian trading on Tuesday. Overall, silver prices continue to maintain a shock decline, but in the short term, the current silver home started a wave of rebound, continue to hold firm above the $15 mark.
Nathan Rines, author of Seeking Alpha, points out that silver prices are expected to rise by more than 40 percent because of fundamentals stemming from covid-19 and a high proportion of gold and silver.
In a recent report, Rines said technical charts show that the gold/silver ratio is now well above its historical average and will soon revert to the mean.
“To be sure, the ratio may vary widely, but it has averaged around 60 for more than a century, mostly between 30 and 90,” the report said. “On two previous occasions, the ratio was close to 100, but never reached that milestone.”
The gold/silver ratio, which measures how many ounces of silver are needed to buy an ounce of gold, is currently 109.61.
Rines USES the respective exchange traded funds of the two metals to calculate a comparison between the two metals and their historical averages.
Ratios for the SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) etfs are currently at a record 3.5 standard deviations above average, according to the report.
In his report, Rines described silver’s historical performance during the financial crisis. “I mean, in times of financial and economic uncertainty, precious metals shine,” the report said. I believe we are in such times now. Gold was an early mover in the 2008 financial crisis, but silver soon followed, eventually overtaking gold in relative value. This pattern may be repeating itself.”
The report said precious metals’ status as a safe haven had eclipsed their status as a hedge against inflation amid an “uncertain financial environment”.
During the last financial crisis in 2008, silver doubled in the first two years, then again in seven months, before falling back from its 2011 peak.
While both gold and silver should do well in a recession, silver is expected to outperform the market due to its higher sensitivity.
On the daily chart, the dollar index maintained a moderate rebound, the MACD red kinetic energy column slightly expanded, the KDJ random index further higher, indicating that the dollar upward momentum is still in place, the next expected to continue to rebound.
On the 4-hour chart, the U.S. dollar index maintained upward momentum, the MACD red momentum column expanded, the KDJ random index slightly under pressure, indicating that the dollar will continue to expand short term gains.
On the daily chart, silver maintained a moderate rally with the MACD red kinetic energy column unchanged and the KDJ random index continuing to move higher, indicating that silver’s rally momentum remains and may continue to rise.
On the 4 hour chart, the silver price started a shock pullback, MACD green kinetic energy column slightly expanded, KDJ random index mildly lower, indicating that silver short term will continue to expand the pullback decline.
Fundamental positive factors:
- Worldometers world real-time statistics show that as of 6:49 on May 12, Beijing time, the global total number of confirmed covid-19 cases reached 4246,795, and the total number of deaths reached 286,740. The cumulative number of confirmed covid-19 cases in the United States has reached 1384,033, and the cumulative number of deaths has exceeded 81,703.
- The White House has asked employees working in the west wing to wear face masks, except when seated at their desks, two senior administration officials said Monday.
- U.S. senator Menendez says republicans will sign a $500 billion spending bill and a fourth federal stimulus package for states and counties.
- Futures traders are pricing in the possibility of negative us interest rates within months. The federal funds rate contract extended this week’s gains, pushing futures above 100 in the first quarter of 2021, suggesting that the benchmark U.S. interest rate will go negative in the future. Fed chairman colin Powell has been adamantly opposed to the idea of interest rates falling below zero, but that hasn’t stopped traders from speculating, and dovish price moves swept through money markets on Thursday. Euro-dollar options, usually used as a hedge against fed policy action, suggest the fed’s policy rate will be as low as minus 45 basis points by mid-2021.
Fundamental negative factors:
- Markets warn of a possible second wave of covid-19 as the global lockdown is lifted, markets are rushing to the safety of the us dollar, putting pressure on dollar-denominated gold. Businesses from Paris to Shanghai are opening their doors as Germany reports an accelerating rise in new infections following initial measures to ease the lockdown. South Korea has also seen a rebound in infections. South Korea says the number of confirmed covid-19 cases linked to Seoul nightclubs has risen to 94.
- Friday’s labor department data showed 20.5 million jobs were lost in April, better than the 22 million expected, limiting the appeal of gold. The unemployment rate was 14.7%, below market expectations of 16%. Despite the lowest level on record, optimism that the worst is behind us as the economy reopens is growing.
3, local time on May 7, the world health organization (who) European office held a press conference, European office director Hans Kruger said, according to data from across Europe, starting from April 12, a day confirmed COVID – 19 cases began to decrease, although slow, but we sure, we saw such a positive signal, COVID – 19 outbreak began to ease.
- According to the New York Times, US President Donald Trump is considering cutting taxes for businesses in his next economic stimulus bill. Mr. Trump said payroll and capital gains tax breaks should be considered, and liability guarantees and business tax breaks for restaurants and entertainment venues must be considered. If the stimulus works, a gradual economic recovery could dampen risk aversion.