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Thread: Current Market Factors in Silver Pricing

  1. #1

    Default Current Market Factors in Silver Pricing

    I know very little about the market, so this is just my take on it, listed in order of importance:

    1. Fed
    2. China
    3. Economy (tied to #1)
    4. 2023 Election
    5. Physical Demand

    1. Many are hoping for a pivot or signs of dovishness; the last comments indicate the latter. There is a lag in inflation, especially in housing which forms about 1/3 of CPI; I expect considerable softening in Q1 and Q2, 2023. I don't expect a return to rate cuts, but I anticipate a less aggressive approach to hiking commensurate with a more wait-and-see approach. This bodes well for silver; however, one must always remember that markets are forward-looking.
    2. 2023 looks somewhat promising for a loosening of covid restrictions and a pickup in demand. Forecasting a mix of good cop/bad cop and some measures to alleviate the stress on the hospital system (more vaccinations) will be surprising if anything is on the scale of brutality witnessed in 89'. Rationale: China is a much bigger player in the world market, and there is more at stake; shutdowns and controls over businesses are scaring away foreign investors who are prudently moving production away from China.
    3. The economy is still looking fairly good, but that can turn on a dime (crypto contagion); however, the model of bad news is good news is still with us.
    4. I expect the administration will lean on the Fed.
    5. Correct me if I am wrong but are there substantial drawdowns on physical stocks? We are nowhere close to a shortage; however, indications are that supplies may be more constrained in the near future (1-5) years.

    We all want higher silver prices, but price shocks are bad because they change behaviors; you don't want to scare off your client base. The cure for higher prices is higher prices; the industry will be incentivized to find alternatives if costs go too far above historical norms.

    My question is, these are some of the current factors influencing pricing that could change a year from now.

    We have moved pretty aggressively off of the mid 18's, and I'm not sure how much is due to short covering. I'm hopeful for the high twenties within the next two years and that we maintain, at the very least, the current baseline of mid 18's. Certainly could go higher but am wary about that as the CFTC can clip the wings of such a rally if they deem it too speculative. A simple change in margin requirements for over-leveraged buyers can result in a very dramatic downturn almost instantly. I recall a long time ago, a one-day swing of over 30%...down.

    I'm heavily weighted in paper, and do have some physical, but premiums these days translate into an instant 20-40 percent loss. Always made way more money trading paper (physical I've actually lost money long-term). Would note that if I make a killing (like I did in 2020) in silver, I will transfer some of the profit to physical.

    Lastly (for now), it is good to see the rather hyperbolic "back up the truck" crowd isn't on here, some of them were sadly financially ruined, then again if prices soar it could attract that type of speculation. Ok babbling, I'll stop now.

  2. #2

    Default

    Some of us are actually hoping for deflation and Silver back down to about $15 an ounce. I do not want Silver to go up at all. I wasn't planning on buying again until around mid teens, but I think we are going to be in stagflation for some time and I do not see Silver bullion demand dropping in that scenario.

  3. #3
    Join Date
    Dec 2007
    Posts
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    Default

    IMHO it has more to do with the CBs running low on supply for the COMEX short game.

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