Silver could outperform Gold as shorts cover

UNITED STATES July 26 2017 10:38 AM

LONDON (Scrap Register): TD Securities sees potential for silver to eventually outperform gold if the U.S. Federal Open Market Committee becomes more dovish, with the metal getting a short-covering bounce, in particular. 

Analysts pointed out that gold rose through key technical resistance levels but silver is still below its technical ceiling. Based on historical tendencies, silver should have outperformed but has not.

“If we assume that the upcoming FOMC meeting on Wednesday will not yield new hawkish commitments, the continued market angst surrounding political dysfunction in the U.S., which includes the health-care legislation and debt ceiling extension, lackluster economic data and equity market risks, money manager interest in precious metals should grow,” TDS added. 

“This suggests that as gold increases in price, silver may well outperform by a wide margin as shorts cover. Specs are still very much positioned on the short end of silver exposure, with shorts aggressively overbought and longs still on the slide,” TDS noted.

Silver still has lots of room to rise technically, not yet reaching the 100- and 200-day moving averages, which gold has broken. As such, we would not be surprised to see silver reach $17/oz or even 17.46/oz in the not-too-distant future, TDS added.