(Bloomberg) — Silver pulled back from an all-time high, as traders took profits following an eight-day rally that’s seen as too fast, too far. Gold was little changed.
The white metal fell as much as 3.4% after the latest US jobs data did little to sway bets of an interest-rate cut next week. Applications for unemployment benefits hit the lowest in more than three years, indicating employers are holding onto workers despite a wave of recent layoffs.
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A lower rate environment would in theory boost precious metals including silver and gold as they don’t pay any interest. But silver’s rapid advance to an all-time high of nearly $59 an ounce in recent days has pushed it into overbought territory, suggesting a price correction is imminent.
“We don’t think the pace of gains we’ve seen this year for silver are sustainable looking ahead,” said Ewa Manthey, a commodity strategist at ING Bank.
Silver has nearly doubled this year, with most of the gains occurring in the last two months due to a historic supply squeeze in the benchmark London market amid surging demand from India and silver-backed exchange-traded funds. While that supply crunch has eased in recent weeks as more metal is shipped to the London market, other markets have seen supply constraints, with Chinese inventories at decade lows.
Manthey said that the primary risk to her silver outlook comes from the industrial side, which accounts for more than half of the metal’s consumption. A sharper-than-expected global slowdown, particularly in electronics or manufacturing, would slow down silver’s momentum, said Manthey. Higher prices for longer could also lead to demand destruction, she added.
Still, ING Bank expects silver prices to remain well supported amid a combination of resilient industrial demand, constrained supply growth and a more favorable macro environment.
“From a macro perspective, silver should benefit from the same drivers expected to support gold – a softer US dollar, Fed rate cuts, and renewed appetite for safe-haven assets amid geopolitical concerns,” said Manthey.
After the latest US jobs data released Thursday, swap traders continued pricing in a quarter-point rate reduction at the Fed’s Dec. 9-10 meeting.
Spot silver fell 2.7% to $56.95 an ounce as of 3:07 p.m. in New York. Gold was little changed at $4,208.53 an ounce. Platinum and palladium fell.