Silver prices rose on Monday, reaching $51.50 per troy ounce. This marks a 2.89% increase from Friday’s price of $50.05. So far this year, silver prices have jumped by 78.23%. The Gold/Silver ratio on Monday was 79.22, down from 80.29 on Friday. This ratio shows how many ounces of silver equal the value of one ounce of gold.

Silver As A Preferred Asset

Silver is valued for its intrinsic worth, though it is less popular than gold. It adds diversification to a portfolio and can be obtained in physical form or through Exchange Traded Funds. Various factors influence silver prices, including geopolitical risks and economic troubles that can raise its value. Prices often rise when interest rates fall, and they can vary with the strength of the US Dollar. Silver is essential in industries like electronics and solar energy because of its great electrical conductivity. Demand from major economies such as the US, China, and India also impacts silver prices. Like gold, silver is considered a safe investment. The Gold/Silver ratio helps us understand the relative values of these two metals.

Strong Momentum And Market Reactions

Silver’s 78% increase this year shows strong momentum that traders should monitor. The price jump to $51.50 isn’t just speculation; it is driven by ongoing inflation, with the latest Consumer Price Index (CPI) report showing an unexpected rise. Investors are clearly using silver to protect against the declining value of fiat currency. The market is also adjusting to changing expectations around monetary policy, which affects silver as a non-yielding asset. Recent signs of slowing manufacturing suggest that the Federal Reserve might pause or change its approach sooner than anticipated after a series of rate hikes in 2024. A struggling U.S. dollar, down nearly 8% over the last six months against a range of currencies, is also boosting silver prices. Additionally, strong industrial demand is outpacing supply. Global green energy initiatives have caused demand for solar panels, which use silver, to reach record highs, with installations in 2024 exceeding forecasts by 30%. The continued growth of the electric vehicle sector, where silver is a critical component, further tightens supply. This scenario supports higher prices. The drop in the Gold/Silver ratio to 79.22 indicates silver’s growing strength, but there’s potential for it to decrease further. Historically, this ratio has averaged around 65, suggesting that silver may still be undervalued compared to gold, even after its recent gains. This situation could encourage long silver and short gold strategies. Due to the recent price surge, implied volatility in silver options has increased, making long call positions more expensive. Traders may want to consider using call spreads to reduce entry costs and manage risk, or selling cash-secured puts at significant support levels. This strategy allows traders to either buy silver at a lower price or earn premiums if the uptrend continues. Create your live VT Markets account and start trading now.

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