Silver Beats Gold, But Is It Still Worth Pursuing?
Silver prices fluctuated after a sharp rally that brought the white metal to within about a dollar of its record high of US$59.33 per ounce in the previous session. In recent trading, silver even fell by around 1.4% as market participants opted to take profits after the significant surge. Nevertheless, sentiment behind silver's rally remains strong. Inflows into silver-backed ETFs last week were the highest since July, with nearly 590 tons added, indicating that many investors still believe the rally is not over.
Technically, silver is beginning to show signs of overbought conditions. The 14-day relative strength index (RSI) fluctuated around 70 throughout last week—a zone typically considered overbought by many traders—and is now around 68.5. Investment analyst Justin Lin of Global X Management Co. believes the current silver rally is now "frothy," highlighting the tendency of retail investors to chase momentum. On the fundamental side, silver has more than doubled this year, outperforming gold by around 60%. The main driver is expectations that the US Federal Reserve will cut interest rates by a quarter point at its final meeting of the year, making non-yielding precious metals like silver and gold more attractive.
Behind this, the silver market is also still feeling the aftershocks of a historic short squeeze. Silver lease rates in London remain high at around 6%, despite the abundant supply of the metal flowing into the major trading center. This situation is putting pressure on other trading centers, with silver stocks in Shanghai nearing a decade-low. Derivatives market activity is also heating up: Comex silver futures options are seeing heavy buying, while micro-futures volumes are rising sharply as retail investors flock to the market. Meanwhile, China's central bank continues to build gold reserves for the 13th consecutive month, signaling that overall interest in precious metals remains very strong amid global economic uncertainty. (az)
Source: Newsmaker.id
