Strong dollar selling pressure caused a sharp short squeeze from silver, with the silver market rallying 6% at the opening this week. Silver prices have broken through sharply, and according to some analysts, it may return to above $20 an ounce, an important psychological level throughout the summer.
Monday's rebound was a solid reversal of silver price trend . Earlier this month, silver prices had fallen to a two-year low below $17.50 per ounce. December silver futures latest price is $19.91 per ounce. silver prices recorded their best performance since late July on Monday, , when the market began to expect Fed to adjust its stance and slow down its aggressive monetary policy stance.
According to analysts, silver benefited from a sharp decline in the US dollar, with hitting a 20-year high last week. Analysts said the factor driving the rebound of is the large number of short positions in the market, which is forcing short investors to restock when prices rise.
TD Securities Commodity analysts said: " As fund managers' short positions on silver increased to the highest level since 2019, the decline in the US dollar's consolidation has caused participants to leave the market ."
However, TD Securities is still bearish on silver because it expects intensified recession concerns to suppress silver industry demand. "Silver remains highly sensitive to our deteriorating commodity demand indicators as 54% silver demand is related to manufacturing. Overall, we continue to expect that while the interest rate market appears to be approaching fair pricing for federal funds, the price trend of precious metals remains inconsistent with historical performance when the rate hike cycle enters a restricted interest rate mechanism."
Since mid-August, TD Securities has been tactical shorting of silver . Nicky Shiels, head of metal strategy at
MKS, said that in addition to benefiting from the weakening of the US dollar, silver is also catching up with gold after being significantly undervalued. Recently, the gold/silver ratio is close to its highest level in two years .
Shiels added that silver prices have room for growth in the near future, but this wave of upward trend may not be sustainable.
In a research note on Monday, she said: "Silver may rise, but from a medium-term macro perspective, as long as the US dollar is still the main cause of suppressing risk appetite, silver will not outperform the market." "Silver squeeze usually occurs when misalignment at positions, and a significant disconnect between the month-old real-time (spot premium) dominated by very strong spot (East and North America) demand, investor sentiment/position." PhilipStreible, chief market strategist at
BlueLineFutures, said that is crucial to the continued rise in silver prices. He added that many investors continued to focus on Tuesday's inflation data.
Economists have said that the decline in the US CPI may begin to change the expectations of US monetary policy. Weak inflation data could prompt the Fed to slow down the pace of rate hikes in for the rest of the year. However, the market still believes that the probability of a 75 basis point rate hike later this month is 92%, and the CPI data is not expected to change that.
Streible said: "H Any weak inflation data this week could cause further selling pressure on the dollar, and then we can easily see the silver price return to above $20. "
Streible also reiterated his position that investors believe silver is more valuable than gold . He said: " When the gold-silver ratio is higher than 95 points, buying silver will never be wrong . This trend can be traced back to the 1980s."
Spot silver daily chart
This article comes from Huitong.com
