Silver: Two Reasons It Is Rising Faster Than Gold

Silver trades around $65.30 today. Earlier this morning it reached $66.20, its highest level in seven weeks. In mid-July the metal was near $55, so it has gained close to 20% in under a month. Gold rose too, but silver moved further.

The first reason is the same one that lifted gold. Friday's US jobs report was very weak, and traders cut the chance of a September Fed rate hike to about 44%. Silver pays no interest, so it looks better whenever expected interest rates fall.

The second reason belongs to silver alone. Unlike gold, silver is also an industrial metal. Factories need it for solar panels and electricity grids, and that demand is growing fast. In June, Chinese imports of silver ore rose 62.5% compared with a year earlier, reaching 219,000 tonnes.

This is why silver has two engines. Gold moves mainly on interest rates and fear. Silver moves on interest rates, fear, and factory demand. When all three point the same way, it rises faster than gold. We wrote about this in late June, when silver traded near $57 and looked cheap next to gold.

Tomorrow brings the test. The US releases its inflation report. A soft number would push rate-hike bets down further and support silver. A hot number would bring the rate-hike case back and pressure it.

One warning for anyone trading it: silver moves more sharply than gold in both directions. The same two engines that lift it can also pull it down quickly.

Silver key levels:

• Resistance: 66.20, then 67.50

• Support: 64.30, then 62.50

Watching: tomorrow's US inflation report, the US dollar, and Chinese industrial demand data.

By Born2trade market research department

Risk Disclaimer: All research and/or forecasts above reflect the author's personal opinion and cannot be treated as trading advice. Born2trade is not responsible for any trading results based on any information in this article. Trading Forex and CFDs carries a high level of risk to your capital. You may lose all of your invested funds. Forex and CFD trading may not be suitable for all investors. Please ensure that you fully understand the risks involved and, if necessary, seek independent advice.