Around the silver market there is some kind of commotion from time to time. Recently it was caused by the action of WallStreetBets group, which with the help of #silversqueeze wanted to throw out the big players from the market. What is attracting the market's attention now?
The aforementioned WSB action was nipped in the bud because the CME exchange, which is responsible for silver futures trading, simply raised the required margins for silver futures trading and made it so that smaller players could not afford to cover them. This cooled sentiment and the price of an ounce of silver retreated from around $30 to $23.
Six years of futile waiting for prices to rise
However, it is worth mentioning that in March 2020, an ounce of silver could be purchased for around $12. Thus, from the bottom to the current peak, the price has soared by about 150 percent.
From August 2020 to today, i.e. for a year, the silver price seems to have been moving in the region of USD 30-23, forming a consolidation and sideways trend for several months. Nevertheless, it is still worth going back to the period before the March market crash. Since the end of 2014, the price of an ounce of silver has oscillated in the $14-20 region after a 70% decline from a peak in the $50 per ounce region. Thus, it appears that 2014-2020 was a potential period of accumulation of relatively cheap silver, and March 2020 was the final stage of "shaking off" those who waited for prices to rise during those years but did not get it.
Tomorrow's technologies require more silver
After the current 150% rise and one-year consolidation, silver seems to be growing chance to return to favor due to the improving outlook for demand for the metal. The long-term outlook for silver appears to remain solid. Due to silver's numerous industrial applications, especially those related to green technologies and 5G, demand for silver will continue in the coming years, the Silver Institute estimates. The demand for silver in photovoltaic cells is growing rapidly as countries move towards adopting renewable energy sources. By 2025, silver's success with 5G will more than double, and by 2030 it could increase 206 percent from current levels, according to the Silver Institute report.
The outlook for industrial demand appears favorable because it is tied to how the world wants to change the way it operates. Demand may grow faster than supply, which in turn could have a positive impact on price. Silver is also somewhat equivalent to hard currency, hence and can be treated to some extent like a cash item in an investment portfolio at a time when real cash is being eaten up by inflation.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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