Why gold’s little sister is becoming more attractive

When the Fed cut interest rates – it was GREAT for Silver!

On Sunday, 15 March 2020, the Federal Reserve finally cut the interest rates to zero percent…

They also announced they would purchase $700 billion in bonds and securities to try and stabilise the financial markets amidst the COVID-19 era…

Now when the Fed decides to cut interest rates, this makes it more attractive for traders and investors to pile their money into precious metals like silver and gold…

This is because lower interest rates mean, there’ll be lower returns for investors from savings, banks and even trust funds.

Instead, investors tend to withdraw their money from low yielding assets, and deposit it into more rewarding financial markets.

This means, they’ll more likely invest in safe havens such as gold, silver and even crypto-currencies, which will drive the prices up…

Now going back to why I’m telling you this now…

At the time the silver price was trading at under $13 an ounce…

And as soon as the Fed cut the interest rates, I wrote in my excel note book.

“15 March 2020 - The US has just slashed their interest rates to zero. This means we can expect a rally in gold and silver in the next month or two…”

One month later, the silver price went above $15.00 an ounce.

I know you might think that the rally has happened and that now I’ve missed out on the opportunity... But if you’ve been following my predictions for the last decade you’ll know this…

I never just jump in and pile money into precious metals as soon as an announcement comes out.

Instead, I wait for confirmed upside according to my charts, before I get in and ride the rest of the rally when it comes.

In fact, it looks like this 15% rise is just the start, and I now expect silver to run another 22% in the next few weeks as investors pile into the metal…

Silver will rally because of investors

In the real economy, silver is mainly used in two main industries: jewellery and industrial (electronics, solar panels etc…)

And this year, we’ve seen a huge collapse in consumption as jewellery stores remain closed and mines remain inactive…

With the global slowdown from the COVID-19 pandemic, leading to a drop in industrial silver demand, this most likely will lead to the silver price falling from $18.80 in January down to $12.29 in March…

However, since the interest rates have been cut – there’s been an increase in buying of silver futures and ETFs... In fact, according to the latest research from the Silver Institute, investment demand will drive prices higher in 2020…

Even Commerzbank said retail investors, rather than institutional ones, tend to buy silver and silver ETFs.

“So from this side, there should not be much selling pressure on silver,”

They also mentioned:

“The silver market is small so it doesn’t take a lot of money to really push prices higher,”

And so with silver acting as a precious metal and a safe-haven once again for investors, the charts agree with the upside to come…

Regards

Timon Rossolimos
Founder, MATI Trader