Silver Surfs the Reflation Wave

Silver ended the week on bullish form with the metal closing above $31/toz for the first time since 16 July, propelled by the same combination of lower US rates and weaker US dollar that has helped gold to fresh all-time highs.

The global reflation theme – to which silver is more directly exposed – also received a further boost on Friday when the South African Reserve Bank chose to exploit the room created by lower US rates, to also cut rates.

Meanwhile, the Bank of Japan struck a less hawkish note in the face of the stronger Yen/weaker dollar. The global rate cycle is clearly accelerating and upcoming announcements and guidance from global central banks will remain a key focus for silver investors going forward. Silver starts the week trading at $30.9/toz

In the meantime, the demand picture for silver appears somewhat mixed. While the most recent CFTC Commitments of Traders Report suggests that investor demand for silver via net speculative long futures positions has returned to elevated levels, ETF/ETC funds have recently seen outflows with clear price sensitivity above $29/toz. Incoming data suggests that industrial growth is soft, although the downside is limited as the silver market is still expected to remain in structural deficit in 2024 on lower supply.

Silver’s technical position suggests that minor ascending oblique resistance now at $30.76/toz has been negotiated. A sustained move above major descending oblique resistance now at $30.86/toz is required to exceed the 11 July high at $31.75/toz while proximate support is present by minor descending oblique at $29.78/toz and the rising 20-day Simple Moving Average at $29.48/toz. Momentum is strong, but not quite at overbought levels.

Upcoming events for silver investors include September Flash Eurozone, UK and US Manufacturing PMIs on 23 September and September Flash Japan Manufacturing PMI on 24 September.