Silver is expected to rally better than gold due to its positioning into the year-end. Industry expert Orchid Research stated that they expect silver to be relatively more resilient than
gold due to its lighter spec positioning.
With expectations of the massive rally, investors are still waiting after the white precious metal was left in the dust compared to its yellow metal counterpart’s gains over the past year. Recently, the white metal has been sensing price pressures just like gold, with July Comex silver last trading at $17.520, down 1.43% on the day.
Silver prices dropped due to the pressure of the rise in U.S. real rates on expectations for stronger economic growth. However, things will turn around for the white metal in the second half of the year due to investor sentiment and industrial demand.
Orchid Research noted that while investor sentiment toward silver was neutral to bearish in Q1, it had sharply improved since the start of Q2. Moreover, ETF holdings are up 25% YTD. In combination with a plausible rebound in industrial demand for silver, the trend could push [silver] strongly higher into the year-end.
Furthermore, Orchid Research advised to buy silver on dips and wait for longer-term gains. It stated that the speculative positioning in silver was looking lighter than that of gold, which is why prices might not see as much selling pressure as the yellow metal.
In a post, Orchid Research added, the light spec positioning in the silver futures market is bullish for the COMEX silver spot price. The speculative community slashed its net long position noticeably in COMEX silver recently, according to the CFTC. In four weeks, this was the first and the highest decline since March 2020. Furthermore, COMEX silver’s net long speculative position is still up 1,181 tonnes (4% of annual supply) over the past month, suggesting a positive shift in sentiment has emerged.
Orchid Research stated that ETF investors had recently concluded that the silver price was too low compared to the gold price, and as such, silver could not be ignored as an alternative safe-haven asset. Silver ETF holdings have surged by roughly 25% since the start of the year.
The post noted that it was significant to remember that the white metal demand from the industrial sector accounted for roughly half of global silver demand. Additionally, the massive contraction in industrial production in Q1 was likely to have resulted in a meaningful decline in silver demand from the industrial sector.