(Bloomberg) -- Investors holding “poor man's gold'' are suddenly a lot richer, and silver's rally may still have room to run.
Silver has surged 13% this month and touched a two-year high on Wednesday. The metal is benefiting as concerns over the global economic outlook bolster demand for haven assets, sending sister-metal gold to the highest since 2013.
“It's all a validation of the existing gold trade, which we still think goes higher, but I think it's to a point now where a lot of people probably feel they've missed the gold trade, and therefore you get this kind of poor man's gold,” Citigroup Inc. technical strategist Tom Fitzpatrick said by phone.
On Wednesday, spot silver traded above $18.22 an ounce for the first time in more than two years, the lower bound of an important resistance range that opens the way for further gains, Fitzpatrick said.
Read More: Gold Rally Just Got What Traders Said It Needed: a New Catalyst
Meanwhile, an ounce of gold still buys about 84 ounces of silver, well above the three-decade average of 67 ounces, also pointing to the possibility of more increases in the white metal, according Mike McGlone of Bloomberg Intelligence.
“The elevated gold-silver ratio and its potential for reversion favors advancing silver,” McGlone said in a note this month.
ETF Demand
Exchange-traded funds backed by silver are also lending support. Total known holdings in silver ETFs are at an all-time high in data going back to 2006, according to figures compiled by Bloomberg. The assets are heading for a 14th straight weekly advance weeks, longest streak in more than 11 years.
“There have repeatedly been strong ETF inflows of late, which no doubt also contributed to the silver price rise,” Daniel Briesemann, a Commerzbank AG analyst, said in an emailed note Wednesday. “There is not much at present to suggest that the demand for gold and silver might abate.”
To contact the reporter on this story: Justina Vasquez in New York at jvasquez57@bloomberg.net
To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Joe Richter, Steven Frank
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