On Tuesday silver traded above $18 for the first time in almost two years. The rally continued early on Wednesday with silver reaching its highest levels since April of 2017. Falling bond yields and the prospect of a Fed rate cut in September have been boosting precious metals with silver now catching up with gold's impressive gains.
Fears of recession in the US increased after the release of economic data on Tuesday. Case-Shiller showed that home prices are rising at the slowest pace since 2012 and the Conference Board reported that consumer confidence dipped in August. The same day, yields on US 30-year bonds dipped below those for three-month notes. This unusual signal bond market signal indicates that investors are anticipating an economic slowdown. An inverted yield curve has historically been a reliable but lagging indicator of a coming recession.
Meanwhile, fears of a broader global recession are escalating amid the ongoing US/China trade tensions. The trade war between the world’s two largest economies has spooked investors since it began in early 2018 and boosted the safe-haven appeal of silver and gold. Additionally, markets have priced in a quarter-point rate cut by the Federal Reserve in September. Lower interest rates increase the appeal of non-yielding assets such as silver and gold.
The ratio of gold to silver prices has fallen 5 percent since late June. While gold has risen sharply during that period, silver has risen even faster. Some analysts point to the falling gold to silver price ratio as a historically bullish indicator for both silver and the precious metals market.
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