Silver Prices Remain Supported after Massive Selloff in Global Stocks

Silver futures traded steady Monday, while gold notched six-week highs amid a global equities selloff triggered by worries about a potential exit by Britain from the European Union.

Silver for July delivery was last trading at $17.33 a troy ounce, virtually unchanged from the previous close. The futures price traded within a narrow range through the overnight session, reaching a low of $17.11 and a high of $17.38.

The grey metal has staged a dramatic recovery through the first two weeks of June, gaining 8.4%. That followed a mostly negative month of May that saw silver prices recoil from 15-month highs.

The short-term momentum indicators show favourable conditions for further upside. Relative strength is holding steady in the mid-60s, while the MACD shows accelerating momentum. Price action has also strengthened, with the 20-day moving average cross the 50-day moving average.

silver prices daily chart 06-13-16

Gold prices rallied sharply at the start of the week, with August futures gaining $12.90 or 1% to $1,288.80 a troy ounce. That was the highest level on the Comex division of the New York Mercantile Exchange since the beginning of May.

Spot gold, which is associated with safe-haven demand, advanced $10.04 or 0.8% to $1,284.28 a troy ounce.

Platinum prices were also seen trading higher, rising $3.79 or 0.4% to $995.44.

The gold-silver ratio that is used by investors to determine when to buy and sell precious metals closed at 73.54 Friday. The ratio is on pace to rise should gold maintain its current highs.

Steady support for precious metals followed a massive selloff in global stocks that was triggered by fears about Britain’s potential exit from the European Union. Latest polls showed a 10-point lead for the so-called Brexit campaign, which is trying to convince voters to quit the EU at next week’s referendum.

Britain votes on its future with the 28-member EU on June 23.

Japan’s Nikkei 225 plunged 3.5% to 16,019.18, a two-month low, with all but one of its companies finishing in negative territory.

Mainland China’s Shanghai Shenzhen CSI 300 Index plunged 3.1% to a close at a two-week low of 3,066.34.

European markets were also down across the board at the start of the week. The pan-European Stoxx 600 Index fell 1.5% through the midday session.

London’s FTSE 100 Index was down 0.8%, while Germany’s DAX declined 1.2%. The major bourses in France and Spain were also down more than 1% before the close.

American stock futures were trading lower in pre-market activity, pointing to a soft start to the day. Futures on the Dow Jones Industrial Average were down 57 points.

US stocks lost momentum last week as the major averages failed to extend recent highs.

The US dollar was trading slightly lower against a basket of currencies Monday despite posting solid gains against the British pound. The US dollar index, which tracks the performance of the greenback against a basket of six rivals, edged down 0.1% ahead of the North American session.

Safe-haven demand drove large gains in the Japanese yen. The dollar-yen exchange rate referenced by the global financial markets reached a daily low of 105.7550, putting it on pace for its lowest settlement since September 2014. The USD/JPY would later pare losses to settle down 0.7% at 106.0950.

In economic data, China’s industrial production gathered pace in May, but retail sales and urban investment rose slower than expected, painting a mixed picture of the world’s second largest economy.

Industrial production rose 6% annually in May, the National Bureau of Statistics reported Monday. Retail sales climbed 10% annually, down from 10.1% in April and forecasts calling for the same. Meanwhile, urban investment slowed to 9.6% annually in the January-May period, down from 10.5% in the January-April timeframe.

Monetary policy and economic data will dictate global macro flows this week. The US Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank will all issue monetary policy statements this week.

Several economic data releases are also scheduled for Tuesday. Japan will release industrial production figures for May, while the UK will produce official inflation numbers covering consumer and factory gate prices. In the United States, the monthly report on retail sales will make headlines later in the day.

Sam Bourgi is a financial market analyst for economiccalendar.com. He has more than six years of progressive experience in economic and financial analysis, research consulting and sectoral analysis. As a published author in government, peer-reviewed, online and industry sources, he has developed a fundamental approach to the financial markets with a broad focus on stock indices, commodities and the technology sector. He earned his Bachelor’s Degree from the University of Windsor and Master’s degree from McMaster University.