Silver prices have been mining out new lows over the last month but may have finally bottomed out after striking $16.00 per ounce on Tuesday.
Prices fell from recent highs near $18.60 as investors grew fearful of further Federal Reserve interest rate hikes as the U.S. economy is showing increasing signs of strength. Higher interest rates make other investments more appealing than metals that don’t pay interest.
For the third time in the last year, prices dropped toward $16, only to find aggressive investor appetite for cheap silver.
Investing in silver can also appeal to those betting on a stronger economy, as silver is a key component in electronics, medical devices, solar collectors, and jewelry, all of which can benefit from increase consumer spending.
China Deal Lifts Cattle and Gas
On Thursday night, the Trump administration announced a new trade deal with China, part of President Trump’s desired “reset” with China. Under the deal, the U.S. will begin importing chicken from China, while the Chinese accept U.S. beef and natural gas.
This announcement was pounced upon by commodity traders, who bid up cattle and natural gas futures on the expectation that Chinese demand could boost prices. As of midday Friday, June live cattle traded for $1.25 per pound and June natural gas garnered $3.41 per million British thermal units.
Oil Market Drains OPEC’s Resolve
Last year, the Organization of the Petroleum Exporting Countries (OPEC) made a drastic move to cut oil production. The cartel did this in order to reduce supplies and boost prices, which happened in the following months.
Unfortunately for OPEC, U.S. and Canadian oil producers took advantage of the higher prices and increased production, neutralizing OPEC’s maneuver. As a result, OPEC is trapped; either they can boost production to recapture market share and pull prices back down, or they can stick with their curbed levels and let North Americans take advantage of them.
For now, it seems that OPEC will keep the lower levels, but oil analysts warn that member countries could start cheating and producing more, a move that could knock prices back from Friday’s level of $47.60 per barrel.