×

Here’s what’s behind silver’s sterling rally

Silver has enjoyed an incredible surge recently, but some analysts doubt the sustainability of the metal's rally.

"As monetary policy over the course next nine months becomes hawkish and the dollar starts to strengthen, then this trade is going to start to unwind rapidly," predicted Stifel Nicolaus portfolio manager Chad Morganlander, referring to his expectation that the Federal Reserve is set to raise rates.

Silver has already risen 11 percent this month, a huge jump after years of losses. The move has come as gold turns a banner year, and industrial metals like copper rise. In the metals market, silver is a bit unique: It's a precious metal that also has some industrial uses.

The worry is that both components of silver's value will soon become anchors on its price. On the precious side, silver's inverse correlation with the dollar will turn into a problem if the dollar starts to rise once the Fed raises rates. On the industrial side, if global growth continues to stagnate, demand for the metal will drop.

Read MoreTop blogger: Buy this silver fund for 2nd quarter

Technical analyst Ari Wald nevertheless emphasizes that at least in the short term, going for silver could remain smart.

"[This is a] very clearly defined reversal of silver's multiyear downtrend here," the Oppenheimer technical analyst said Wednesday on CNBC's "Power Lunch."


"The breakout point was at $16 — that 16 is now going to act as a level of support, and we do believe the trade is up to $18.50 resistance," he said.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect