{"id":146730,"date":"2019-04-30T10:21:41","date_gmt":"2019-04-30T14:21:41","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=146730"},"modified":"2019-04-30T10:21:41","modified_gmt":"2019-04-30T14:21:41","slug":"silver-market-alert-powerful-bullish-setup","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/04\/silver-market-alert-powerful-bullish-setup\/","title":{"rendered":"Silver Market Alert: Powerful Bullish Setup"},"content":{"rendered":"
April 30, 2019<\/div>
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By Money Metals News Service<\/b><\/p>\n

The silver market appears to be setting up for a big move.<\/p>\n

After spending this spring stair-stepping lower in a narrowing range, silver prices have formed a falling wedge pattern. That pattern usually resolves in a powerful directional breakout. The good news for bulls is that falling wedges usually<\/i> break out to the upside.<\/p>\n

\"Silver<\/p>\n

Commercial hedgers and bullion banks (i.e., \u201csmart money\u201d) in the silver futures market have significantly trimmed their short positions over the past couple weeks \u2013 a bullish development. While their net positioning isn\u2019t yet at an extreme, it is more favorable than not for a price rally to commence in the near future.<\/p>\n

Of course, neither futures traders nor chart patterns are 100% reliable. Nor do they have any particular implications for where prices may be headed years from now.<\/p>\n

Long-term investors can benefit from identifying opportune entry points on the charts. But if a big multi-year bull market is to come, it will be driven by fundamentals \u2013 supply, demand, relative valuations, inflation rates, and investor sentiment.<\/p>

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Let\u2019s therefore drill down into silver\u2019s fundamentals.<\/p>\n

The Silver Institute is widely considered to be an authoritative source. The Institute released its annual World Silver Survey<\/i> in April, which showed global silver demand rose by 4% in 2018 to more than 1 billion ounces. At the same time, supply from mine production fell 2% last year to 855.7 million ounces.<\/p>\n

At first glance, these numbers present a compelling case for higher silver prices<\/a>. Demand appears to be outstripping supply.<\/p>\n

However, there is no actual physical shortage. The mining supply deficit is (for now) being made up by scrap recycling and other secondary above-ground sources of physical silver.<\/p>\n

There ultimately will be a physical shortage if demand continues to rise while mining production falls. The market\u2019s way of averting such a shortage is through higher prices to incentivize more output and encourage thrifting by industrial users.<\/p>\n

Silver is a difficult market to forecast in part because there are few primary silver miners in existence. Most silver production comes from gold and base metals mining operations.<\/p>\n

The gold mining industry is shrinking as reserves get depleted without being replaced by new discoveries and small companies get gobbled up by larger ones.<\/p>\n

Some industry insiders believe \u201cpeak gold\u201d has arrived, which would imply annual global gold mining output heads down in the years to come.<\/p>\n

Silver can be viewed as a leveraged play on gold. Silver is the more volatile of the two monetary metals.<\/p>\n

\"Silver<\/a><\/p>\n

And right now it happens to be extremely cheap versus gold. Silver currently trades at about 1\/86th the price of gold, just off a 25-year low hit earlier in April.<\/p>\n

A mean reversion toward a more typical silver:gold ratio would imply massive silver outperformance going forward. At silver\u2019s last major cyclical peak in 2011 above $49\/oz, the white metal traded at 1\/30th the gold price. Going back further in history, there is precedent for further narrowing in the gold:silver gap.<\/p>\n

The wild card is investment demand, which often actually rises during periods of rising prices. It\u2019s human nature to want to join a trend in motion \u2013 and over the past few years, U.S. retail investment demand has been soft amidst a trendless silver market.<\/p>\n

Only the most farsighted, hardy, and patient investors buy aggressively while the market isn\u2019t going anywhere. They stand to reap the biggest gains, though, when prices finally do take off.<\/p>\n

Weak sales figures over the past couple years on popular bullion products such as Silver Eagles<\/a> suggest investors remain largely disinterested in silver. However, digging deeper into World Silver Survey<\/i> data, we find that global investment demand for bars shot up by 53% in 2018.<\/p>\n

Much of that demand came from India and China, where evidently more people of wealth are deciding to stack silver bars<\/a>.<\/p>\n

Gold has long been a powerful status symbol in Asia. But silver represents a more practical, more affordable way for the masses to hold wealth and conduct barter and trade transactions.<\/p>\n

While central banks around the world (including China\u2019s) accumulate gold at an accelerating pace, individuals accumulating their own monetary reserves in the form of silver bullion<\/a> appears to be an emerging trend in the emerging world.<\/p>\n

The bottom line is that the underlying fundamentals of the silver market are turning more and more favorable, even though the headlines aren\u2019t \u2013 yet.<\/p>\n

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The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Money Metals News Service The silver market appears to be setting up for a big move. After spending this spring stair-stepping lower in a narrowing range, silver prices have formed a falling wedge pattern. That pattern usually resolves in a powerful directional breakout. The good news for bulls is that falling wedges usually break […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-146730","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146730","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=146730"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146730\/revisions"}],"predecessor-version":[{"id":146734,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146730\/revisions\/146734"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=146730"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=146730"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=146730"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}