(Kitco News) – A rally in silver might be the subsequent catalyst that drives gold costs greater, based on one market analyst.
In analysis notes launched this week, Mike McGlone, Bloomberg Intelligence senior commodity strategist, voiced his bullish outlook for silver. He mentioned that he sees potential for costs to push to $22 an oz.
“The elevated gold-silver ratio and its potential for reversion favors advancing silver,” he mentioned. “With gold unchanged close to $1,500 an oz, revisiting the imply would suggest a silver value close to $22 an oz.”
Nonetheless, it received’t be a simple experience greater. McGlone famous that silver, at the moment at above $17 an oz, is buying and selling at an essential pivot stage. “If costs do not maintain above $17, the indication could be failure,” he mentioned.
September silver futures final traded at $17.155 an oz, up 1% for the week.
McGlone added that with the gold rally wanting overextended in the near-term, it might now be silver’s time to shine and lead the valuable metals advanced.
McGlone mentioned he’s watching investor demand for silver and gold-backed alternate traded funds very fastidiously. In a report Friday, he famous that silver ETF demand has reached a document excessive.
“The 10 week rate-of-change in silver holdings at about 20% to Aug. 15 is the sharpest achieve for the reason that peak of the monetary disaster in 1Q09,” he mentioned. “That spike in silver ETF inflows preceded the value launch to the 2011 excessive shut of $48.44 an oz.”
Whereas silver is unlikely to retest its 2011 all-time highs, McGlone mentioned that its not a lot of a long-shot for gold. He mentioned that gold ETF flows are nonetheless about 6% from their all-time highs.
“It seems solely a matter of time earlier than this apex is breached, if silver is a information,” he mentioned. “The yellow metallic is barely about 20% under its peak. Until the development reverses in ETF inflows, it must be a matter of time for brand new highs within the gold value.”
Finally, McGlone stays bullish on gold and silver because the Federal Reserve is anticipated to start out a brand new easing cycle amid financial uncertainty. He added that this atmosphere ought to proceed to weaken the united statesdollar, a bullish issue for gold and silver.
“With the Federal Reserve lastly becoming a member of world central banks in a transfer to lodging, the development is unlikely to finish till true currency-type debasement inflation surfaces,” he mentioned.
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