Analysts See Silver in a Perfect Position to Benefit From Rising Inflation

Published on: Feb 16, 2024
Author: Caroline Kong

Gold prices fell for the second week in a row as the latest strong economic data in the United States led to the Federal Reserve’s interest rate cut expectations further reduced in the first half of the year. Fortunately, the April gold futures contract on the New York Mercantile Exchange settled at $2,025.60 an ounce on Friday, holding a key support level at $2,000 an ounce.

Ole Hansen, head of commodity strategy at Saxo Bank, said that while gold may face further selling pressure in the short term, it remains bullish on the precious metal in the long term. Barbara Lambrecht, commodities analyst at Commerzbank, said she did not expect much movement in gold prices in the short term as the market remained in a tug of war with investors hoping to see the Fed cut rates, but hopes for a rate cut in the first half of the year had largely been dashed.

Julia Cordova, founder of CordovaTrades and author of The MoneyMaker, said she believes silver has more potential than gold, which should have been building a bottom and will outperform gold by a wide margin next week.

Michele Schneider, director of trading training and research at MarketGauge, said she is also more focused on silver and has a neutral view on gold. She stressed that gold is largely ignored until it falls to $1,920 an ounce or rises above $2,100 an ounce. But the same cannot be said for silver, which has strong industrial demand and is in an excellent position to benefit from rising inflation.

Schneider noted that the Fed may not be able to control inflation without killing gold. And investors worried about inflation have reason to look to silver as a safe bet.

Analysts reminded investors that silver has managed to hold key support at $22 an ounce and ended the week testing initial resistance at $23.50 an ounce. Unlike gold’s decline, silver is up 7% from its lows this week.

Hansen added that despite the risk of lower gold prices, strong physical demand in Asia should continue to provide support until investors step in to push prices higher. Physical demand from central banks and retail investors, particularly China, will continue to support the precious metals market.

If you’re interested in investing in silver, you might want to keep an eye on this company: Silver Storm Mining Ltd. (TSXV:SVRS). Silver Storm Mining Ltd. holds advanced-stage silver projects located in Durango, Mexico. Golden Tag recently completed the acquisition of 100% of the La Parrilla Silver Mine Complex, a prolific operation which is comprised of a 2,000 tpd mill as well as five underground mines and an open pit that collectively produced 34.3 million silver-equivalent ounces between 2005 and 2019. The Company also holds a 100% interest in the San Diego Project, which is among the largest undeveloped silver assets in Mexico.

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