With a 7.95% rally in the past week (to 16.30 23/08/2023)1, silver is on the cusp of reversing all the past month’s losses. Bearishness in the metal is reversing quickly.

 

Net speculative positioning in silver futures fell 88% in the month to 15/08/20232, with positioning now 1 standard deviation below its 5-year average3. However, we suspect that excessive shorts were being covered in the past week (data will be published by Commodity Futures Trading Commission on Friday 25/08/2023 relating to Tuesday 22/08/2023 i.e. after we publish this note). 

 

 

Whats hot 25th August

Source: Bloomberg, WisdomTree, 14/08/2018 to 15/08/2023. Stdv = standard deviation. Historical performance is not an indication of future performance and any investments may go down in value

 

 

Technicals supportive
Since hitting an intra-day local low of US$22.35/oz at 13.30 on 15/08/2023 silver prices have bounced up to US$24.27/oz at 16.30 on 23/08/2023 (+8.6%)4. That low point seems to match the Fibonacci-implied support levels5  looking at year-to-date silver performance (the 38.2% retracement, Figure 2). At 16.30 on 23/08/2023, silver appear to have pierced through the 61.8% retracement resistance (Figure 2), which technical analysts would see as a bullish sign. The next retracement level (76.4%) is at US$24.66/oz and we will see that presents a support or resistance.

 

 

Figure 2: Fibonacci retracements

Whats hot 25th August 2

Source: Bloomberg. 31/12/2022 to 23/08/2023. White lines – silver price, Red lines – high and low points, Green and grey lines - Fibonacci retracement levels. Historical performance is not an indication of future performance and any investments may go down in value

 

 

Have investors become less gloomy about silver?
Silver inventory in London Bullion Market Association vaults which fell precipitously in 2022 (-28%), has stabilised and gained 3% year to July 2023. That indicates more institutional investors are allocating to silver, this year but from a very low base last year. Silver holding in exchange traded commodities (ETCs) have only modestly declined in 2023 so far (4%) after a 15% decline in 2022 (source: Bloomberg, 23/08/2023). So, while the ETC investors are no longer dumping the metal aggressively as they were in 2022, they are not yet rebuilding. 

 


WisdomTree have witnessed a whopping 198% rise in silver web page views in the ten days to 23 August 2023 over the prior ten days, possibly indicating that silver is once again grabbing the attention of ETC investors.

 

 

Related blogs

+ Silver: the great retail vs institutional divide

 

 

Sources

1 Source Bloomberg

2 Source Bloomberg, Commodity Futures Trading Commission

3 Source Bloomberg, Commodity Futures Trading Commission

4 Source Bloomberg

5 Source Fibonacci retracement levels—stemming from the Fibonacci sequence—are horizontal lines that indicate where support and resistance are likely to occur. They are used by technical analysts. Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 76.4%. The prior move in question is set by the previous high and low in the window of analysis (year-to-date in our case).
 

 

 

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