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(Kitco News) Despite growing interest and trading volume in silver, squeezing the metal is relaxing, according to analysts.
“Evidence suggests that the failure failed,” said Daniel Ghali, TD Securities’ commodity strategist. “The #silversqueeze virality has already reached its peak, with Google searches already on a lower trend.”
The main problem was that the silver market is more liquid, which makes it very different from the GameStop game triggered by Reddit’s WSB movement.
“The principles of a successful squeeze are: A viral narrative as a catalyst, a short-term interest, illiquid security and an active options market. These principles do not bode well for trying to squeeze silver, especially given the massive liquidity of the silver profile, “said Daniel Ghali of TD Securities.
Liquidity and the size of the silver market are critical factors, said Wenyu Yao, ING’s chief commodity strategist.
“The biggest obstacle is the large size of the market. If we look at the average daily volumes of Comex silver since the beginning of 2020, they are equivalent to about $ 10.97 billion. Then, if we analyze the positioning data for the future Comex, the managers of money has a long network, and so, at least in this part of the market, there is not much to squeeze, ”she said.
The tightening fails because the silver move is not as coordinated as the RedStit GameStop game. Many Reddit users have posted posts against the silver, calling it a distraction from GameStop.
Posts like “stop buying SLV … reverse GME technically” were pushed to the top of the 75.2 K uplink discussion forum, which is much more than the original silver posts on the platform.
One of the Reddit community’s main concerns with the silver game is that Citadel Advisors LLC, which injected cash into Melvin Capital amid the short GameStop, is also a significant holder of SLV and could benefit from the precious metal rally.
“It appears that some retail investors have found the silver market a ‘breaking nut’ more difficult than some stocks … Moreover, the attack itself was not as determined or coordinated as with the shares in question,” he said. said Commerzbank analyst Eugen Weinberg. “Many retail investors have had doubts about the point of assault and have rightly pointed out that ‘evil’ hedge funds in the silver market are betting on growth rather than falling prices, as opposed to equities.”
Evidence that silver mining fails is growing by the minute. After rising Monday to an eight-year high of $ 30.35 an ounce, silver fell significantly, and March’s Comex silver futures traded last at $ 27.03, down 8.10. % on that day.
“Dealers’ VET positions have increased, but there is ample stock availability in foreign exchange deposits, in addition to 1.1B oz in LBMA safes and more in private safes,” Ghali noted.
This move does not come as a surprise, as many analysts have warned investors not to follow the market.
But despite Tuesday’s silver withdrawal, TD Securities still sees the precious metal bursting at $ 30 an ounce, invoking macro support forces.
Commerzbank added that the latest silver price action would eventually work in favor of the metal. “After all, it has made it clear that silver is an attractive metal for investment and has allowed many new market entrants to discover the silver market on their own,” Weinberg said.
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