Silver shines brightly ahead of Chinese industrial data

With interest rate expectations continuing to fall, noninterest-bearing precious metals have been able to shine of late. Concerns over weak growth and tame inflation have helped to boost expectations that central bank monetary policy will remain extremely accommodative for longer than previously expected.

With interest rate expectations continuing to fall, noninterest-bearing precious metals have been able to shine of late. Concerns over weak growth and tame inflation have helped to boost expectations that central bank monetary policy will remain extremely accommodative for longer than previously expected. Many analysts are fully expecting the Federal Reserve to cut interest rates this year, with economists at Deutsche Bank, for example, now forecasting three cuts – at the July, September and December FOMC meetings. Other central banks have likewise turned dovish, most notably the ECB and RBA. Out of the two precious metals, gold has performed better until now given that stocks and base metals had come under renewed selling pressure on US/China trade concerns. But with risk assets finding some support again, silver has been able to shine more brightly over the past couple of days. In fact, with the gold/silver ratio being at extremely elevated levels of around $90, it wouldn’t come as major surprise if the grey metal were to enjoy some bargain hunting soon. However, the immediate focus will now turn to top-tier data from China, one of the biggest consumer nations of precious metals along with India. In the early hours of Friday, the world’s second largest economy will report its latest estimates on retail sales, fixed asset investment and industrial production. Of these, the latter will be the most important one given silver’s dual roles as a precious metal and an industrial material. If industrial production comes in well above the 5.4% y/y rate expected by analysts, then this should help to boost the demand outlook for industrial metals, including silver. Conversely, a number weaker than 5.4% could derail the mini rally. Technical market participants, meanwhile, will have liked the fact that silver has broken its short-term bearish trend line and as price is currently residing above the 21-day exponential. As things stand, therefore, the path of least resistance is to the upside for silver.

Source: Trading View and City Index


Related Articles

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.