Posted 9th septiembre 2022

Silver Enjoys Rare Strong Week as Traders Buy Undervalued Asset

silver bars kag

Silver has enjoyed a strong week that could yet see it record a 5% gain as it edges up towards $19 an ounce.

Historically, this remains a very low level for silver with the metal trading at $26 an ounce as recently as April but after a torrid few months and the false dawn of the price having reached its bottom in July, this week’s gains are being greeted warmly by silver investors.

The fact these gains have come despite another central bank, in this instance the European Central Bank, implementing another large hike to its interest rate suggests that the hawkish environment in which there will be many more increases to interest rates over the coming months has been priced in.

Silver has been punished severely by the aggressive stance of the Federal Reserve in particular, with its lack of yield seeing it fall out of favour at times of rising interest rates, so the fact it has still been able to rise this week despite expectation mounting that the Fed will implement another 75 basis point hike later this month suggests that investors see the metal as undervalued having been overly punished in recent weeks.

While silver’s slight recovery is long overdue, the reality remains that the metal will struggle to make significant gains given the macroeconomic picture. A key first target will be how the price reacts when it reaches $20 an ounce as this was the level silver held for a period last month before plunging again.

The price will need to first challenge and then hold on to this key threshold to demonstrate that the recent buying interest is driven by more than traders buying an undervalued asset and show that the metal is returning to favour.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.