Silver prices on a tear, and look to a 127.2% extension

Silver prices have been turning heads midweek, with a surge overnight that took the precious metal's September futures contract higher by 16.5 cents, or 0.9%, to $18.318 an ounce while the more actively-traded December silver contract added  on 15.8 cents, or 0.9%, to end at $18.456 which was the highest finish for a most-active contract since April 2017.

Spot prices are currently trading at 18.32, slightly off the overnight highs of 18.50 which were a full 1% positive on the day, having travelled from a low of $18.07. Interestingly, the gold and silver ratio now stands at over 10.4% lower than its peak in May earlier this year.  

Gold and silver increasingly looks like an attractive asset to money managers

"Gold and silver are catching a bid as US yields fall deeper into inversion, sending a message to the Fed that it will soon need to change its tone on the need for rate cuts as the market plays another round of poker with Powell," analysts at TD Securities explained, adding:

"At the same time, the deteriorating economic circumstances in Europe are empowering the macro bears, as the likely resumption of QE in Europe is set to push yields deeper into negative territory, which should ultimately push US yields lower still. Staring down at the prospect of unconventional policy, as the pile of negative yielding debt continues to grow, gold increasingly looks like an attractive asset to money managers and central bankers, which should see allocations to the yellow metal continue to firm."

Silver levels

Meanwhile, from a technical standpoint, the bulls have found a base in the 17.50s (50% Fibo of 2016 highs to recent swing lows) while penetrating the 17.70s as the near-term resistance area and have taken on the 18 handle. Bulls took out the 38.2% at 18.35 and can now aim for a 127.20% Fibo ext. in the 19.60s.