Silver’s Short-Term and Long-Term Outlook
CPM remains bullish on silver both short term and long term.
On a short- term basis silver has been discovered and re-discovered by a range of investors, sell side marketing groups, and buy side retail and institutional investors. Some fund managers and investors are liquidating their short to intermediate term gold positions and buying silver instead, assuming gold may take a breather in its upward march while silver will play catch up. This is applying upward pressure on short-term silver prices just as other investors, including the Wall Street Bets crowd, are going long silver. The internet is full of people waving their arms saying that silver prices are going to unprecedented highs.
While CPM Group believes that silver prices will rise in the short term, it does not forecast gains in prices to unprecedented or record levels at this time. That may come later, in a few years. Any sharp gains in prices at this time are likely to be short-lived. Prices may rise well above $30, but they also may not stay that high, as has been the experience in the past 6 months. Longer term, CPM expects silver prices to rise to record levels at some point in the next 3 to 10 years.
Part of the current bullishness is based on expectations of stronger fabrication demand from the electronics and solar panel industries. These are real developments, but the increases in silver demand from these industries is not so strong as to support sharply higher prices at present.
Instead of being based on fundamentals and economic realities, the recent and current move higher is based purely on investor optimism and less on any sharp increase in fabrication demand or sharp decline in supply.
Part of this trend is nonsensical conversations about how there is no silver to meet ETF and investor demand. That is not the case, and the commentary to this point displays a total lack of knowledge of silver inventories and silver market mechanics, as well as what happened in early February when the WSB boys tried to squeeze the silver market. They based their concept of squeezing the silver market on the baseless conspiracy claims of massive naked short positions on the Comex held by bullion banks that have persisted since the late 1980s. They also failed to understand the differences between bullion banks’ short futures hedges of long physical positions and the short positions investors take with borrowed equities in the stock market. Primary silver production, which accounts for roughly a third of total silver mine supply, is likely to shrink in the near future with reduced capital expenditure in this sector limiting new capacity coming onstream. But this does not mean there are not hundreds of millions of ounces, if not billions of ounces, available to meet current and future demand.
Positive investor sentiment is likely to apply upward pressure on silver in the short term. The accumulation of silver inventories by investors is expected to be the most bullish factor supporting silver prices.
Technically there is an ascending triangle in silver. A break above $28 would have such a technical price chart pattern signaling a sharp upward spike in silver, to $30.40, $32, $33, or even $35: On a short-term basis, a spike. Prices would be expected to fall back quickly, as they did after the August 2020 spike to $29.92 on 7 August and to $30.35 on 1 February this year, basis the nearby active Comex futures intraday highs.