Silver sees improved positioning, technicals and interest to go with its recent rally
NEW YORK (August 25) Silver’s 7.95% gain over the past week to Aug. 23 means “silver is on the cusp of reversing all the past month’s losses” and the recent bearishness in the overall market is also quickly coming to an end, according to Nitesh Shah, Head of Commodities and Macroeconomic Research for Europe at WisdomTree.
“Net speculative positioning in silver futures fell 88% in the month to 15/08/2023, with positioning now 1 standard deviation below its 5-year average,” Shah said. “However, we suspect that excessive shorts were being covered in the past week (data will be published by Commodity Futures Trading Commission on Friday 25/08/2023 relating to Tuesday 22/08/2023 i.e. after we publish this note).”
Shah said the technical indicators for silver have also become increasingly supportive.
“Since hitting an intra-day local low of US$22.35/oz at 13.30 on 15/08/2023 silver prices have bounced up to US$24.27/oz at 16.30 on 23/08/2023 (+8.6%),” he said. “That low point seems to match the Fibonacci-implied support levels looking at year-to-date silver performance (the 38.2% retracement, Figure 2. At 16.30 on 23/08/2023, silver [prices] appear to have pierced through the 61.8% retracement resistance, which technical analysts would see as a bullish sign.”
He said the next retracement level of 76.4% is found at the $24.66 level, “and we will see that presents a support or resistance.”
Shah also pointed out that silver investors appear to be less negative about the precious metal’s prospects, noting that the silver inventories in London Bullion Market Association vaults, which declined by 28% in 2022, have since stabilized and have posted gains of 3% for the year to July 2023.
“That indicates more institutional investors are allocating to silver this year, but from a very low base last year,” he said.
Meanwhile, silver held in exchange traded commodities (ETCs) has seen only modest declines of 4% to date in 2023 after falling 15% in 2022. “So, while the ETC investors are no longer dumping the metal aggressively as they were in 2022, they are not yet rebuilding,” Shah said.
He also noted that overall interest in the metal appears to be rising. “WisdomTree have witnessed a whopping 198% rise in silver web page views in the ten days to 23 August 2023 over the prior ten days, possibly indicating that silver is once again grabbing the attention of ETC investors.”
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