It Is Now Silver's Time To Shine Says Analyst
Sarah Benali Thursday August 17, 2017 12:03
(Kitco News) - With speculative positioning at extreme levels and continued uncertainty in the cards for the second half of the year, one analyst remains bullish on silver for the rest of the year.
“I have presently a positive view on silver, expecting prices to push gradually higher in the second half of the year,” noted Boris Mikanikrezai, precious and base metals strategist for FastMarkets, in a post late Wednesday.
He looked at speculative positioning in Comex silver, which he highlighted reached an extreme short level in mid-July when speculators were net short of 32 million ounces, the most bearish positioning since August 2015.
“When speculative positioning reaches an extreme level (like in the summer of 2015 or 2017), a powerful rally tends to ensue because the speculative positioning needs to normalize,” he said. “Given the tendency of speculators to move from an extreme positioning to another, I see plenty of room for speculative buying in the coming weeks/months, which should push prices much higher.”
Silver prices have been following gold’s lead higher as markets continue to digest the latest Federal Reserve minutes, which were deemed dovish by the marketplace. September silver futures last traded up $17.055 an ounce, up 0.68% on the day.
Not only is positioning signaling higher silver prices, but the macro backdrop may also be favorable to the metal, the analyst said.
“What the markets experienced last week [with North Korea-U.S. tensions] was, in my view, a glimpse of what could happen during a more prolonged period at some point in the second half of the year,” he wrote. “Although geopolitical tensions have dissipated since Monday, it would be foolish to think that they cannot resurge as the stance by North Korean leader Kim Jong-un remains aggressive.”
And, aside from geopolitical tensions, Mikanikrezai said domestic political concerns like the looming debt ceiling could also boost silver later in the year.
“This could lead to a sharp sell-off in the dollar (in spite of its excess positioning), a drop in US real rates, and losses in risk assets (like equities), which would produce a supportive environment of silver via a surge in safe-haven demand.”
For Kitco News