Silver has lived up to its usual whims and has reversed sharply over the past few weeks and gold’s reversal, which began early in the month after the failure at $ 2,000 and then extended by the pullback in equities made silver’s pullback worse, ”said Rhona O’Connell, head of market analysis for EMEA and Asia at StoneX.
O’Connell compared the money to Cinderella at the ball. “When she leaves the ball she usually does it in a flash,” she wrote, describing the money spill. “Over a long period of time, if gold is supporting a bull market, then silver will generally gain alongside it, and generally outperform, but in the short term it can be dangerous. A combination of gold on the back foot and a sad economy the outlook is enough for money to remember that this is an industrial metal and start a tantrum like the one we just saw. ”
During the month of September, silver plunged 19%. Despite the monthly drop, silver is still one of the best, with spot prices 31% higher than the same time last year.
On Monday, silver prices rebounded, beating the daily advance of gold as the US dollar weakened. At the time of writing, December Comex silver futures were trading at $ 23.635, up 2.35% on the day, while December gold futures were trading at $ 23.635 on the day. were at $ 1,884.20, up 0.96% on the day.
September’s disappointing price action doesn’t mean the outlook has turned more bearish, O’Connell stressed, citing supply and demand fundamentals as well as ETF demand.
“The fundamentals of silver mean that there is no real market compensation price, since only 29% of mining production comes from primary silver mines; when scrap supplies are added to the equation, the output from the primary silver mine is only 25% of the supply. The underlying market this year should be in equilibrium, and it is the bullish race in gold that has driven silver prices up, in turn encouraging very substantial investments in ETFs ”, a- she said on Monday.
ETF entries have taken significant amounts of money off the market, pushing the price up this year.
“At their peak so far this year, silver ETFs had absorbed 9,028t; after this recent sale, which was obviously flawed, they are still up 7,791 t since the start of the year, ”said O’Connell.
The recent sale managed to get rid of some holders with weaker hands and encouraged new shorts. However, the net long position in silver is still healthy – 5,998t or 9% more than since the start of the year, according to the CFTC report.
Another important aspect of the silver market is the retailers sticking with the money, which could drive down prices and encourage bargain shopping, O’Connell added.
“Silver investors, especially retailers, tend to be a loyal fan base and are unlikely to desert the market in droves. Indeed, when gold begins to reassert silver, the bargain hunt would not come as a surprise, ”she said.
The backers of gold remain in place, which bodes well for silver in the future.
“Swirling economic and geopolitical uncertainties are still generally favorable. Every market has to wash out from time to time and gold almost invariably falls when stocks are under pressure as investors liquidate in distress. With a gloomy economic outlook and gold under pressure, silver is still 46% higher than the 2019 average spot price, ”noted O’Connell.
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