Silver lagging Gold but expected to continue moving higher

UNITED STATES June 14 2016 10:15 PM

NEW YORK (Scrap Register): Silver has been lagging gold again lately, but they expect silver to continue moving higher later this year said analysts at BMO Capital Markets.

“There continues to be profit taking in silver, while gold speculative positions are seeing growing longs again,” BMO added. “Earlier this year, silver prices lagged gold by about six weeks due to uncertainty around industrial activity globally. 

However, they noted that the negative sentiment towards industrial demand has eased somewhat, especially given the outperformance of the steel complex.

The firm said that silver industrial demand tends to be “sticky,” although this is often overlooked by markets. For one thing, the risk of substitution into lower-cost metals is relatively low because manufacturers tend to use silver for specific physical properties, such as high conductivity. 

BMO remains more constructive on the precious metals over base metals this year due to a slow-growth global economy that continues to be a drag on base-metals demand.

“The biggest downside risk remains a potentially stronger U.S. dollar, especially if expectations for a Fed rate later this year begin to climb,” BMO added.