Will Silver Continue to Rally?

The price of silver rallied during last week. Will silver market continue to heat up? Let’s examine the recent news that may affect silver (SLV).

The recent recovery of silver has also reflected in the rise in demand for leading silver ETFs such as iShares Silver Trust. During February, the Silver Trust’s silver price increased by 4.4%, and the amount of silver in the Trust rose by 0.4% to 162.58 tonnes. The recent news regarding the progress of the U.S economy may have contributed to the rally of silver price. Let’s further explore this issue.

U.S labor market and precious metals

Last week, the U.S non-farm payroll report was released. It showed only 113K jobs added in January – well below the numbers expected. This news had little positive effect on the price of silver. The table below shows the changes in the price of silver, USD/Yen and the increase in employment.

In the last two meetings, the price of silver rallied following the past couple disappointing labor reports. Further, the linear correlation between the shifts in employment and price of silver is -0.34, which is a mid-strong and negative correlation.Besides the non-farm payroll report, other reports such the manufacturing PMI also showed a slower growth – the PMI fell to 51.3 – the lowest level in months, which means the U.S manufacturing sectors are still growing but at a slower pace. 

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