Posthaste: Ignore Reddit Revolutionaries – Here’s The Real Reason Money Is A Good Bet
Silver’s glowing rally comes to a close this morning, but there might be room for another fiery rally.
The metal was down this morning after CME Group, the world’s largest financial derivatives exchange that trades in various asset classes including commodities and currencies, increased margin requirements for contracts to term, days after users of social media platforms like Reddit deployed their collective retail power to drive up prices.
Spot silver jumped 7.3% to its highest level since February 2013 at US $ 30.03 an ounce on Monday, but was trading down 4.6% to US $ 27.64 l ounce this morning.
But unlike GameStop Corp., a failed video game retailer, retail investors may have unwittingly come across a winner, thanks to its own strong fundamentals.
Still, no one expects a 1600 percent rally for the metal.
“Prices (for silver) will likely remain volatile, but US 5-year real rates are lower than expected, and the coming end of destocking in India and China through Q2’21 could see prices climb to 33. US $ / oz, âCitibank analyst Maximilian Layton said.
Wall Street banking analyst predicts silver will climb to US $ 38, but doesn’t expect buying fervor for the volatile metal to last, in part because yields may not be. also attractive to retail investors, who have developed a taste for three or even four-digit percentage gains.
âUnlike some small-cap US equity tickers with large short-term interest that have seen large buys, the money complex is already ‘long’ from a speculative (net, firm, and normalized) futures position, everything like the physically backed silver ETF product, âLayton said. “So the money market as a whole, is now the net purchase of funds increasingly long.”
In December, UBS Switzerland AG expected silver to outperform gold, with a target of US $ 26-28 / oz in early 2021, based on “industrial applications, not internet speculation “.
“The nature of the last step could add to price volatility and pose short-term upside risks to our target. We expect silver to continue to outperform gold throughout the year. UBS chief investment officer Mark Haefele said in a report.
RBC Capital Markets also believes that gold and silver will both perform very well this year, in a global monetary environment that could experience inflation for the first time in a decade.
âAdditionally, we note that the gold / silver ratio, which typically sees silver outperforming in times of strengthening precious metals markets, has only just eclipsed the long-term average,â the analyst wrote yesterday. RBC Tyler Broda.
While Broda expects Reddit boards to trigger a short-term price spike, silver will be a harder market for retail investors to handle.
âGlobal precious metals markets have grown over the millennia, making this market more robust in our view than a small-cap company with a deteriorating outlook,â BRoda said.