Silver prices have breached the psychological barrier of $35 per ounce and have hit an over 13-year high on Thursday.
“Risk appetite in the general marketplace is still shaky, which continues to produce safe-haven buying of gold and silver,” Jim Wyckoff, senior market analyst at Kitco said in a report.
The charts have turned more bullish for both metals, which is also inviting the technical traders to the long sides.
At the time of writing, the July silver contract on COMEX was at $36.128 per ounce, up 4.3% from the previous close. The contract had hit $36.235 an ounce earlier in the day, its highest level since February 2012.
Meanwhile, gold prices on COMEX also breached the $3,400 an ounce level. Prices were 0.3% up at $3,408.06 per ounce at the time of writing.
“Interestingly, it was an unexpected surge in silver which provided the trigger for gold’s rise,” David Morrison, senior market analyst at Trade Nation, said.
Economic data support prices
For the week ending May 31, seasonally adjusted initial claims for state unemployment benefits increased by 8,000, reaching 247,000, as reported by the US Labor Department on Thursday.
Initial jobless claims surpassed predictions, coming in above the 236,000 mark that analysts had anticipated.
The previous week’s figure was revised down by 1,000 claims to 239,000.
Ongoing underwhelming labor market figures this week have fueled robust investment demand in the gold and silver markets.
To smooth out short-term fluctuations, the four-week moving average of initial jobless claims in the US, considered a more stable indicator of labor market trends, increased to 235,000. This figure is a rise from the prior week’s revised average of 230,500.
Fed decision
Labor market figures this week are being closely watched by investors, as they are crucial in shaping the US Federal Reserve’s upcoming decisions on monetary policy.
The central bank maintains that it is not pressed to reduce interest rates. This stance is driven by persistent inflation risks alongside a comparatively robust labor market.
Despite a weakening jobs market, some economists doubt the Federal Reserve will deviate from its current neutral policy at their upcoming meeting later this month.
As per the CME FedWatch tool, current data indicates a 30% likelihood of a Federal Reserve interest rate cut in July, up from 22.5% last week. This suggests a growing expectation in the market for a rate reduction.
Non-yielding metals such as silver and gold tend to benefit from lower interest rates.
Technical outlook
July silver futures show a significant near-term technical advantage for bulls. This bullish strength follows a clear upward breakout from a previous trading range, evident on the daily bar chart.
To achieve further upward momentum, silver’s price needs to close above the significant technical barrier at $37.50, according to Wyckoff. This is the next target for bullish traders. A key downward price target for sellers would be daily closes under the strong $34.00 support level, he noted.
“The question now is whether silver can build on these gains and go on to take out its record high of $50 from April 2011, or if it has already exhausted itself,” Trade Nation’s Morrison said.
Thursday’s move has seen silver smash above $36, taking it well over October’s multi-year highs to levels last seen over thirteen years ago.
Morrison added:
This week’s moves are typical of silver. Like Mount Etna, it can go from dormant to live with no warning.
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