Silver – Soft September After Super Summer

Silver Acting as Safe-Haven Asset

It was a sweet, sweet summer for silver, which rocketed 19.6% higher. What goes up must eventually come down, however, and this rule certainly rings true when it comes to currency movement and profit-taking. XAG/USD has declined by 2.70% in September.

This retracement should not be all that surprising, keeping in mind that it has been relatively minor in comparison to the huge gains we saw in July and August.  In the Tuesday session, silver is trading a shade under the 18-level, at 17.93.

Of interest to investors and traders is the fact that silver is acting as a safe-haven asset, much like gold, which also jumped higher in the summer months. Both commodities have benefited from escalating trade tensions between the U.S. and China, as well as the dovish stance of major central banks worldwide, especially the Federal Reserve.

If investors continue to treat silver as a safety net, then key fundamentals such as inflation, GDP and job numbers could have a significant impact on the direction of XAG/USD. As well, interest rate policy could move the metal, so if investors feel that more rate cuts are on the way, silver prices could move higher.

The pair started the week on a sour note, dropping 1.2% on Monday. It was just last week that silver punched above 19.50, and there was growing talk of a rally past the symbolic 20-level.

However, traders should keep in mind that the 20-level has proven a tough nut to break – it was last tested in September 2016. I would temper any over-enthusiasm for silver, as I expect the metal to hover between 18-18.60 during the week. Of course, a major geopolitical event or unexpected key U.S. economic report could change things, but absent any of these shocks, I would be surprised to see sharp volatility from the metal.