All That Gains is Not Gold: Silver Price Hits a 10-Month High

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In the first two months of 2016, gold was the market’s MVP but, as we noticed in March, the silver price has started to play catch up.

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The gray metal recently hit a 10-month high after closing above $16 per ounce, while gold has traded flat over the past two months.

Silver hits 10-month high

Silver hits a 10-month high. Source @StockCharts.com.

Silver keeps outshining gold thanks to the same factor we pointed out in March: Oil prices making a comeback have boosted demand for silver’s industrial uses. Gold is not used nearly as much in cars, solar panels and gadgets as silver is.

Oil Holds Near $40 a Barrel

Oil manages to hold above $40-barrel

Oil is managing to hold above $40 a barrel. Source: @StockCharts.com.

Oil prices have, so far, successfully fought off bears when they were attacked earlier this month. Oil has a huge role in the world’s economy. Higher oil prices are giving relief to market participants who were worried by its continuous fall. That helped metal prices rise in Q1. Silver’s price strength is clearly coming from its economically-sensitive role as an industrial metal.

Stock Market Rally Remains Intact

S&P 500 rising non-stop. Will it overcome last year's levels?

The S&P 500 rising non-stop. Will it overcome last year’s levels? Source: @StockCharts.com.

Thanks, in part, to healthier oil prices global markets have been gaining since mid-February and while this rally lasts, money keeps rotating out of safe-haven assets such as gold and bonds. Silver is less impacted than gold in this way, and that also helps silver outperform it.

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Stock markets in the U.S. are acting particularly strong and, so far, they have avoided any price pullback. We will keep a close eye on stock markets and see if they can continue to go up from here as sellers could come into the market soon as prices approach last year’s levels.

Is Silver Set to Continue Gaining Against Gold?

The gold-to-silver ratio falling since March amid global stock market and industrial metals recovery

The gold-to-silver ratio has been falling since March amid a global stock market and industrial metals recovery.  Source: @StockCharts.com.

Not necessarily. But while the factors explained above keep moving in a positive direction, silver will continue to benefit. We’ll see if the rally in the base metals complex and the accompanying one in stock markets extends into Q2.

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