Silver has lost roughly half its value since peaking at an all-time high in January amid a broad shakeout in precious metals prices. But it has also dropped by more than a third against gold, and data suggests it is knocking on the door of levels that could spark further losses against the yellow metal.
Timing of the Decline
The troubles for both gold and silver started on January 30, when speculation that the Federal Reserve might be less inclined to cut interest rates swept through the market. Rising fears of inflation since the start of the Iran war exacerbated this sentiment as markets increasingly prepared for the possibility of rate hikes in the US.
Silver Hit Harder Than Gold
Silver was hit much harder than gold, in part due to its status as an industrial metal, which increases its sensitivity to shifts in appetite among investors to take risks. Silver had also had a much bigger rally than gold, so it had more to give back in the subsequent retreat.
According to market analysts, the ratio of gold to silver prices has risen sharply, approaching levels that historically have preceded further declines in silver relative to gold. This ratio is now at a critical juncture, and if it breaks higher, silver could face additional selling pressure.
