Proactive Investors - March has been a positive month so far for precious metals as improving risk appetite has seen silver, a more risk-sensitive commodity, outperform gold.
Silver is up about 13% and counting this month, trading hands at US$23.99 on Thursday afternoon, while gold is up about 8% for the month-to-date, trading at US$1999.50.
City Index and FOREX.com market analyst Fawad Razaqzada highlighted that, with silver outperforming gold, the gold-silver ratio has broken below its bearish trend line.
“This points to further outperformance for XAGUSD over XAUUSD,” he said. “If the bullish trend remains intact for both metals, silver should shine more brightly, is what this is telling us.”
Silver continues to print higher highs and higher lows on the smaller time frames ever since it bottomed out at $20 per ounce in early March, Razaqzada noted.
“It is likely to soon post a higher high above the peak of around $24.50 it had reached earlier this year,” he said.
“If that happens, silver will have also broken its long-term bearish trend line that has been in place since its last peak at $30 in February 2021. The validity of this bullish technical view will become weak should silver turn lower on the session and move below key support around $23.50 now.”
Razaqzada pointed out that both silver and gold have been supported by falling interest rate expectations, a weakening US dollar, some safe-haven demand, and strong physical demand from China.
“Copper and, to a lesser degree, silver, are often seen as proxies for the Chinese economy. Whenever China’s economy is growing, industrial demand for base metals tends to rise,” he said.
“Given the positive correlation between copper, silver and Chinese equities, this is an additional sign of strength for the silver outlook.”