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(Kitco News) Despite an increase in interest and the trading volume in silver, the pressure in the metal, according to analysts, is declining.
“The evidence suggests that the pressure failed,” said Daniel Ghali, trading strategist at TD Securities. “The #silversqueeze virality has already peaked with Google searches declining.”
The main issue was that silver’s market is more liquid, which makes it very different from the game GameStop caused by Reddit’s WSB movement.
‘The principles of successful printing are: a viral narrative as a catalyst, a high short interest rate, an illiquid security and an active options market. profile, ”said Daniel Ghali, TD Securities.
The liquidity and size of the silver market are critical factors, according to Wenyu Yao, senior commodity strategist at ING.
“The biggest obstacle is the large size of the market. If we look at the daily average volumes on Comex silver since the beginning of 2020, it is about US $ 10.97 billion. If we then look at positioning data for Comex futures contracts, ‘money managers hold a net long, and at least there is not much to press from this part of the market,’ she said.
The push failed because the move to silver was not as coordinated as the game from Reddit’s GameStop. Many Reddit users have published posts against silver, calling it a distraction from GameStop.
Reports such as ‘stop buying SLV … it’s technically reversing GME’ were moved to the top of the discussion board by 75.2 000 votes, which is much more than the original silver printing press on the platform.
One of the Reddit community’s biggest concerns with the silver play is that Citadel Advisors LLC, which injected cash into Melvin Capital amid the short press release of GameStop, is also a major holder of SLV and could benefit from the rally of the precious metal.
“It seems that some small investors’ silver market has a harder ‘nut to crack’ than some stocks … What’s more, the assault itself was not as resolute or coordinated as with the stocks involved,” the analyst of Commerzbank, Eugen Weinberg, said. “Many retail investors have had their doubts about the point of the assault, and have rightly pointed out that the ‘evil’ hedge funds in the silver market, unlike with equities, are betting on rising rather than falling prices.”
The evidence that the silver print fails is growing by the minute. After Monday’s rise to eight years of $ 30.35 per ounce, silver fell significantly, with the silver Comex futures last trading at $ 27.03 in March, down 8.10% on the day.
“The EFP positions of traders have grown, but there is enough stock available in exchange warehouses, in addition to the 1.1 billion oz in LBMA safes and more in private safes,” Ghali said.
This move does not come as a surprise, as many analysts have warned investors not to chase the market.
But despite the retreat of silver on Tuesday, TD Securities still sees the precious metal break up to $ 30 per ounce, citing supporting macro forces.
Commerzbank added that the latest price action in silver will eventually work in favor of the metal. “After all, it made it clear that silver is an attractive investment metal and that many new market participants were able to discover the silver market themselves,” Weinberg said.
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