• Silver futures rose 6.11% from the 52-week low after a surge in US job openings for June 2021 to 10.1 million. 
  • A rise in job reports was offset by a high quit rate that helped cool down tapering fears. 
  • While silver futures gained, SLV ETF lost 3.42% into the trading day.

Silver futures traded to a 1.62% price change as of midnight on August 10, 2021, from the previous day’s close. It rose 6.11% from the 52-week low of $22.295 to move to a high of $23.657. 

1-year chart of the silver futures prices

The surge occurred even as the US job openings report recorded a 6.22% rise after hitting 10.073 million from a low of 9.483. 

Fundamentals

Analysts are considering an early possibility of the Federal Reserve’s tapering of the economy, and this increase in the price of silver comes as a surprise. Fundamentally, tapering of the economy would mean a reduction in the quantitative easing (QE) program currently in the market. 

The US Fed buys bonds monthly worth $120 million. A decrease in this purchase program would lower the bond prices, as it would increase the bond yield. We may also consider the occurrence of reverse QE where the Fed may begin selling bonds to the market. The rise in bond yields will lead to an increase in interest rates and a reduction of inflation as banks would seek to buy government bonds thereby lowering the cash reserves or the money supply in the market.   

Silver, like gold, provides a hedge against inflation. As a store of wealth, investors will naturally seek more silver if inflation is high and not low. 

Job openings increased to 10.1 million while 6.7 million were added as hires. Total separations in June 2021 rose to 5.6 million while the quit rate was 2.7%. With layoffs and work discharges at 0.9%, it means that the Fed will have to wait a bit longer before raising interest rates. Tapering is directly linked to increasing inflation.

SLV’s slow track

Silver investors often opt to invest in the iShares Silver Trust (SLV) ETF that tracks the price of silver.

2- SLV prices against Silver Futures

However, while silver futures gained, SLV ETF lost 3.42% into the trading day. Pre-market trading as of 6:41 am GMT also showed a 0.37% decline to $21.67 from a close of $21.75 on August 10, 2021. 

With expectations of tapering on the roof, prices of gold and silver had declined to force down SLV. On August 9, 2021 silver futures hit an 8-month low at $22.95 per ounce (a decline of 3.7% from the day’s high at $23.44 per ounce). 

3- Gold and Silvers Prices

Gold prices rose 0.65% as of midnight on August 10, 2021, overcoming sell-off fears. There was an indication of improved investor sentiment when prices hit a high of $1,739.35 from a low of $1,728.75 per ounce. 

Like Silver, gold is also expected to soar if the increase in inflation becomes apparent. In contrast, higher interest rates will make investors consider the opportunity costs of holding gold that does not bear interest. 

Technical Analysis

Loss of ground for silver futures forces them towards the support at 21.810. It has been on a decline since it hit resistance at 30.240. The decrease is supported by the 14-day RSI that is below the oversold region at 22.22. At 23.390, the futures are moving below the 9-day EMA found at 24.655.  

4- Silver Futures analysis

The 14-day ATR that tracks volatility shows a slight increase at 0.820. We may see an increase in the number of buyers since the price is on an uptrend at 23.390 (above the support line).