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Bitcoin's Weakness Means Renewed Strength In Silver - Hecht

David Lin  

(Kitco News) - Bitcoin’s fall below $8,000 on Tuesday, hitting a two-week low, could reignite interest in the silver market, according to one commodity analyst.

Andrew Hecht, creator of the Hecht Commodity report wrote in a recent post on seekingalpha.com that one of the reasons why silver underperformed within the precious metals sector, is because it faced tough competition from cryptocurrencies; in particular, unprecedented momentum that pushed bitcoin to a high of $19,000 by the end of 2017.

“In the world of speculation, the price appreciation becomes a strong magnet as the bullish move was nothing short of spectacular,” he said.

However, he expects the trend to start reversing as bitcoin prices remain in a strong downtrend. Bitcoin’s recent fall to just under $8,000 represents a 58% fall from its December highs.

“While cryptos were all the rage in 2017, it is possible that many traders and those seeking wide price variance will once again start watching the price of silver,” he said.

Not only does Hecht expect liquidity to flow back into silver, but he added that on a technical basis, silver looks ready for a move upwards when compared to the recent uptrend in gold ’s prices.

“As gold is approaching its 2016 high, silver has lots of catching up to do which could mean that buyers will find their way back to the market,” he said. “I am surprised that the precious metal has not broken to the upside along with gold, but as that sentiment rises in the market we could see a return of buying to the silver market sooner rather than later.”

The report said that gold’s rally after the last Fed announcement occurred with “higher than average volume and rising open interest,” which are bullish signs for gold. Technical patterns indicate that gold’s trajectory could take it to above $1,400 an ounce in 2018.

Other reasons for silver’s climb upwards are a depreciating dollar and global inflationary forces, he said.

Precious metals, including silver, have historically held an inverse relationship with the dollar. Thus, dollar weakness presents a tailwind for silver prices.

Both gold and silver have performed well during past inflationary periods. “A decade of accommodative monetary policies by central banks is likely to cause rising prices with all of the liquidity still flowing around markets,” the report said.

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