Market Watch: Here's What's Behind the 'Perfect Storm' Sending Silver Prices Surging

Article by Steve Goldstein in The Wall Street Market Watch

It is hard to find an asset on more of a roll than silver.

On Tuesday, silver for September delivery surged nearly 7%, the highest settlement since March 2014, and 83% above its March lows. Silver was up in the early hours of Wednesday as well.

“It seems the precious metal has been caught up in the perfect storm,” says Jeroen Blokland, senior portfolio manager at Robeco Asset Management.

Much of what’s driving silver also is driving gold — aggressive monetary policy financing of fiscal spending, which limits the ability of bond yields to rise. That is sending inflation-adjusted, or real, yields lower, which tends to boost precious metals.

In addition, silver is still cheap relative to gold by historical measures.

But the latest catalyst may well be the European Union’s €750 billion recovery fund, which not only earmarked 30% of spending on environmental initiatives but said funding of other projects has to be in line with the Paris climate accord.

“The catalyst of the recent rally, however, seems to be the fact that the world is aiming for a ‘green’ recovery, with a significant part of the stimulus assigned to environmentally friendly measures,” says Blokland. “As silver has a wide range of industrial uses, including electronics and solar panels, demand for this metal should rise from this angle as well. We remain overweight commodities as the outlook for both industrial and precious metals look bright.”

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