‘Just sit back and watch’: Silver on a massive tear, but how long will it last? – by Peter Koven (Financial Post – July 5, 2016)


Silver has gone on a tear over the last month, culminating in a massive gain on Monday that is only adding to questions about the sustainability of the rally.

The metal has jumped 28 per cent since the start of June, but the gains have accelerated since the Brexit vote on June 23. The key futures contract jumped as much as eight per cent overnight, reaching a two-year high of US$21.23 an ounce.

U.S. markets were closed Monday and commodities often go through huge fluctuations when liquidity is low. Peter Hug, global trading director at Kitco Metals Inc., said the move could simply be short covering in a thin market. “Everyone’s looking at silver and saying, ‘It doesn’t feel like it’s real, but we’re not going to get in the way of it right now. Let’s just sit back and watch,’” he said.

Regardless, silver’s performance has been impressive throughout 2016. The price has soared 48 per cent so far this year, compared to a 28 per cent gain for gold. The gold-silver ratio, a closely-watched metric in the precious metals sector, has dropped to roughly 69 to one.

It peaked at 83 to one in early March, meaning 83 silver ounces were needed to buy one ounce of gold. The ratio is highly volatile, but that was one of the highest levels in history and was not viewed as sustainable.

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