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(Kitco News) Despite rising interest and trading volume of silver, the collapse of the metal is set, according to analysts.
“Evidence suggests that compression has failed,” said Daniel Ghali, commodity strategist at TD Securities. “The virality of #silversqueeze has already reached its peak, with Google searches already down.”
The main problem has been that the silver market is more liquid, which makes it very different from the GameStop game unleashed by Reddit’s WSB movement.
“The principles of successful compression are: A viral narrative as a catalyst, high short interest, illiquid security and an active options market. These principles do not bode well for the attempt to compress the silver, especially given the massively broader liquidity of the silver profile, “said Daniel Ghali of TD Securities.
Liquidity and the size of the silver market are critical factors, said Wenyu Yao, ING’s chief strategist in commodities.
“The main obstacle is the large size of the market. If we look at the average daily volumes of Comex silver since early 2020, they are equivalent to about 10.97 million US dollars. Then, if we analyze the positioning data of the future Comex, the money managers maintain a long network, and therefore, at least in this part of the market, there is not much to squeeze, ”he said.
Compression is failing because the switch to silver is not as coordinated as Reddit’s GameStop game. Many Reddit users have posted anti-silver posts, and this is considered a distraction from GameStop.
Posts such as “stop buying SLV … is technically investing GME” have been pushed to the top of the discussion forum with positive votes of 75.2 K, which is much more than the platform’s original silver posts .
One of the main concerns of the Reddit community with the silver game is that Citadel Advisors LLC, which injected cash into Melvin Capital amid rapid pressure GameStop, is also a significant holder of SLV and could benefit from the rally. of the precious metal.
“It appears that some retail investors found the silver market” harder to break “than some stocks … Also, the assault itself was not as resolute or coordinated as with the shares in question,” he said. Commerzbank analyst Eugen Weinberg. “Many retail investors had doubts about the point of the assault and rightly pointed out that the ‘evil’ hedge funds in the silver market are betting on rising rather than lowering prices, unlike stocks.”
The evidence that silver pressure fails grows every minute. After Monday’s rise to the eight-year high of $ 30.35 an ounce, silver fell significantly, with March silver Comex futures trading for the last time at $ 27.03, up 8.10% the day.
“The positions of EFP distributors have grown, but there is a wide availability of inventories in exchange warehouses, in addition to the 1.1 oz in LBMA safes and more in private safes,” Ghali noted .
This measure is not a surprise, as many analysts have warned investors not to pursue the market.
But despite the silver retreat on Tuesday, TD Securities continues to watch the precious metal explode to $ 30 an ounce, citing macro-solidarity forces.
Commerzbank added that the latest price action on silver would eventually work in favor of the metal. “After all, it has made it clear that silver is an attractive metal investor and has allowed many new market participants to discover the silver market for themselves,” Weinberg said.
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