By Kitco News

Monday July 04, 2016 10:36

(Kitco News) - Silvers is gaining major market attention Monday as prices rallied to a two-year high overnight but analyst are mixed as to whether or not prices will continue to post impressive gains.

U.S. markets are closed Monday for Independence Day; however, overnight, in electronic markets, September silver futures rallied to a high of $21.225 an ounce, its highest level since late-July 2014. The precious metal rallied almost 7% from the start of the Asian trading session to its overnight high; this followed last week’s 9.5% gain.

Angus Nicholson, market analyst at IG Markets, noted that silver has seen its best one-day move since September 2013.

So far this year, silver prices have rallied more than 49%, the best performing precious metal, almost doubling gold’s 27.5% year-to-date rally. The grey metal’s upswing has also helped push the gold-silver ratio to 65, its lowest reading since August 2014.

Peter Hug, global trading director at Kitco Metals, warned that it might be too soon to call a breakout in silver. He noted that thin markets are creating massive volatility. He added that Tuesday’s price action will be needed to confirm the latest bullish price action.

Nicholson said he could see silver prices continue to rally, on the back of increased industrial demand and pushing the gold-silver ratio down even lower.

“Although silver has pulled back a bit from its highs there still looks to be a lot of momentum behind its move higher,” he said. “Industrial sector exposure has helped drive the gold-to-silver ratio down to its lowest level since August 2014. And if history is any guide, such moves in the ratio usually continue until the long-term average of the ratio of 60 is hit.”

Joni Teves, strategist at UBS, is also bullish on silver; however she added that she expects its outperformance to slow.

“The current environment is conducive for silver to do well – risk sentiment is upbeat for now, while gold is also doing well given the medium/long-term macro picture,” she said.

While silver’s rally so far this year has been impressive, Ole Hansen, head of commodity strategy at Saxo Bank, said that silver is hovering around fair value and prices could even fall back to $19.90 an ounce in the near-term.