The price of silver on the spot market went up 3% during trading on Tuesday, hitting $60.24 per ounce, which is a new all-time high.
Gold rose 0.4% to $4,235.9 per ounce.
The rise in the cost of precious metals is driven by expectations that the Federal Reserve will cut its benchmark interest rate by 25 basis points following its next meeting on Wednesday. Based on futures quotes for the rate, traders estimate the probability of this at 89.6%, according to CME FedWatch.
If the forecast comes true, the rate will be reduced for the third consecutive meeting.
“Another 25 basis point rate cut is expected, which is generally optimistic for gold. The market remains strong and could reach record prices after the Fed’s announcement,” said Bob Haberkorn, senior market strategist at RJO Futures.
Currently, it takes 71 ounces of silver to buy 1 ounce of gold, compared to 82 ounces in October.
“The silver-to-gold price ratio is 70 times closer to the average for the last couple of decades, but historically we have gone as low as 40. So, there is definitely potential for growth,“ said Maria Smirnova, director of investments at Sprott Asset Management. ”If we don’t eliminate the deficit, silver has only one way to go — up.”
