(Bloomberg) — Silver (SI=F) jumped to a fresh peak on Monday, with traders placing speculative bets given ongoing supply tightness and rising expectations for an interest-rate cut in the US. Gold (GC=F) was steady.
Most Read from Bloomberg
The white metal rose as high as $57.86 an ounce, after soaring almost 6% to a record on Friday. It has climbed for six consecutive days and doubled in value this year, outpacing a roughly 60% rally in gold.
A record amount of the metal flowed into London in October to ease a historic squeeze in the world’s biggest silver trading hub, but this has put other centers under pressure. Inventories in warehouses linked to the Shanghai Futures Exchange recently hit their lowest in nearly a decade, and the cost of borrowing the metal over one month remains elevated.
“Shortages in the global market as a result of the recent squeeze in London are still being felt,” said Daniel Hynes, a commodity strategist from ANZ Group Holdings Ltd. “With gold taking a breather, it appears investors have turned their attention to silver.”
Both metals have also got a boost from increased expectations that the Federal Reserve will cut interest rates in December. Markets are fully pricing in a quarter-point rate cut on continued weakness in the American labor market and a crescendo of dovish comments by Fed officials over the last week. The release of economic data delayed by the US government’s six-week shutdown has also supported the case for lower borrowing costs, which typically benefit non-yielding precious metals.
“The move last week has been speculatively driven, with accelerating upside momentum attracting more and more fast money,” said David Wilson, director of commodities strategy at BNP Paribas SA. “Key to watch is the fact that the gold-silver ratio has got down close to 70,” he said, adding that investors will be watching how expensive silver is getting relative to gold.
The ratio indicates how many ounces of silver are needed to buy one ounce of gold.
Traders are also monitoring any potential tariff on silver after the precious metal was added to the US Geological Survey list of critical minerals last month. Fear of a sudden premium in America might make some traders hesitant about sending the metal out of the country, offering little prospect of relief should the global market tighten further.
Investor interest in silver increased last month, with inflows to physically backed exchange-traded funds accelerating after investors booked profits in October, following the previous peak.
