Silver has rallied on the back of surging investor interest, with an increasingly supportive macroeconomic backdrop as well as a projected fourth annual market deficit. The price rally was accelerated Friday, helped by spillover sentiment in the broad metals markets and by the mania in the so-called meme stocks.
“This week was kind of the recreation of the meme stock,” Phil Streible, chief market strategist at Blue Line Futures, said Friday in a phone interview. Those speculators naturally look for different areas to exploit. And silver is usually the one that they favor.”
Silver was a target market of Reddit retail traders in 2021 amid a buying stampede in GameStop Corp. and other small-cap stocks that captivated the financial world.
The precious metal’s break through the $30 level may trigger substantial exchange-traded funds buying activity that may increase the risks of a silver squeeze, particularly with the renewal of the “meme stock” craze which filtered into silver markets last time around, according to TD Securities senior commodity strategist Daniel Ghali.
Investors remain net sellers of physically-backed silver ETFs so far this year, with holdings down 1.7% as of Thursday, according to data compiled by Bloomberg. Money managers remained net bullish on Comex silver futures, with gross shorts held by them accounting for 12.5% of total open interest as of May 7, according to CFTC data.
Silver has soared by more than a quarter this year, outpacing gold and making it one of the year’s best-performing major commodities. Still, in relative terms to gold, silver is still cheap.
The two precious metals move largely in tandem as both offer similar macro- and currency-hedging properties. With gold hitting a record on central bank buying, retail interest in China and a resurgence in bets that lower US interest rates are on the way, silver has gone along for the ride. Although there’s been scant interest from investors in silver-backed exchange-traded funds, physical sales have picked up, including at Singapore-based dealer Silver Bullion Pte.
Silver has a dual character, valued both for its uses as a financial asset and an industrial input, including clean-energy technologies. The metal is a key ingredient in solar panels, and with robust growth in that industry, usage of the metal is expected to reach a record this year, according to the Silver Institute. Against that backdrop, the market is headed for a fourth year in deficit, with this year’s shortage seen as the second biggest on record.
(By Yvonne Yue Li)