Silver vs Gold & The Federal Reserve Refills The Punchbowl

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When will Silver catch up with Gold?

While gold is scaling new highs, its much poorer cousin – Silver – is struggling to break out. This leaves many precious metal analysts scratching their heads – what’s wrong with silver?

Take a quick look at Silver’s daily chart. The metal, with a periodic symbol of Ag, has a wide range of industrial uses, including cars and photovoltaics. For the past 3 years, Silver prices have crawled sideways, trapped in between the floor at $18 and ceiling at $26. Underperforming the silver metal are silver miners. One of the largest, Fresnillo (FRES), currently listed in the London Stock Exchange, even slumped to new 52-week lows this week. Sentiment on the entire silver complex is, in a nutshell, pretty bearish.

But the renewed risk-taking activities could the catalyst that propelled silver through the 2-year wide resistance. But having disappointed investors so many times in the past, perhaps watch to buy either on a firm breakout or a regression back into the lower side of the range. A higher-beta bet would be silver miners (Silver ETF choices are Precious Metal Miners – GDX or GDXJ).

Federal Reserve Refills The Punchbowl

Conventionally, the only job that the Federal Reserve has is ‘to take the punch bowl away’ when the party gets going.  

Nothing of the sort is really happening. Minutes after the second monetary meeting of 2024, which concluded on Wednesday, investors heard just one message: Rate cuts.

In particular, investors assumed that the American central bank would lower the Fed Funds Rate by 75 basis points in the next few months, from the current 5.25-5.5 percent band.

This view is backed up by the critically examined ‘dot plot’ diagram. The chart, which is published alongside the Fed statement, highlights the views of each member and where they think the policy rate should be this year. Most members thought 4.75 percent was the ‘appropriate’ rate for the FFR (see below). That translates into about three 0.25 percent rate cut this year.

Uncertainty has been swiftly banished. No further Quantitative Tightening (QT), and certainly no more rate hikes. Inflation has been tamed. Hooray!

The market’s reaction is immediate. Gold surged to new record highs; as did S&P 500, Dow Jones and Nasdaq. Bitcoin (highlighted earlier) surged almost 10 percent yesterday evening. According to Nasdaq (, the number of instruments that rose to 52-week Highs yesterday outnumbered the 52-week Lows by four to one.

Is this the green light to take on more risk? For momentum-based traders, the answer is probably ‘yes’. Strength begets strength. However, nothing in the financial market is set in stone. Some bad corporate results or weak guidance (as we saw with Kering yesterday) will send individual stock prices plummeting. Therefore, only take appropriate risks for your portfolio.

Source: Federal Reserve

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