The price of silver popped this week as investors moved back to precious metals. Silver jumped to a high of $24.23, its highest point since December 28th. It has trailed that of gold, which surged to a record high on Tuesday.
China GDP plans and rate cutsSilver price rose as investors reflected on the Two Sessions meeting in Beijing. In it, officials decided to set the GDP growth target at 5.0%, a figure that most analysts believe is highly ambitious.
Therefore, there is a likelihood that Beijing will implement several stimulus measures to achieve this target.
Still, it is unclear how this stimulus will be since the country has already provided resources in the housing and stock sectors.
Silver, as an industrial metal, tends to do well when China is thriving. Historically, the Chinese have been the top buyers of the metal.
This also explains why silver has lagged behind gold recently. Data published on Monday revealed that China’s manufacturing PMI remained in a contraction zone in February.
The same is happening in other countries like in the United States and in the European Union. Japan, another key silver buyer, has moved into a recession.
Therefore, silver price jumped as investors raised their bets that the Federal Reserve will start cutting rates soon. Consumer confidence, industrial production, factory orders, and durable goods orders have all plunged hard recently.
The most recent data showed that consumer confidence has dropped in the past few months. This, in turn, could lead to lower retail sales and other consumer spending metrics.
Looking ahead, the next important catalysts that could move silver are the upcoming ADP private payrolls and the official NFP data scheduled for Friday. These reports will have a role in the next Federal Reserve meeting.
The gold/silver ratio has also risen in the past few weeks. It jumped to $90, higher than last year’s low of 74. This means that one ounce of gold is equivalent to 90 ounces of silver.
This rally has also happened because of increased central bank and investor purchases of gold. Central banks like those in China and Russia have accumulated gold as Washington has weaponised the dollar.
Chinese investors have also turned to gold now that their stock market has crashed hard in the past few months.
Silver price forecast
Silver has recovered slightly in the past few days. It has rebounded from the YTD low of $22 to about $23.60. As a result, the 50-day and 100-day ALMA indicators are about to form a bullish crossover.
Silver has also formed an inverse head and shoulders pattern, which is a popular bullish sign. It has also moved above the Ichimoku cloud indicator.
Therefore, the outlook for silver is moderately bullish, with the potential target level being the December high of $25.90. This target is about 9.43% above the present level. The alternative scenario is where the metal drops to $22.12.
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