New World Invesment Research

Silver is trading at about 2.5 times its 250D moving average, and the volatility spread in silver and gold is at an all-time high, which implies the speculative nature of trades in silver. There are no demand-supply imbalances and other fundamentals that can justify 250% growth in silver over the past year. Industrial demand trends point to only moderate increases, and inventory dynamics do not point to material shortages in the long-run.

While the rally in gold prices is supported by the underlying macroeconomic risks and conditions (central banks’ purchases, lower FED rates, tariffs, and geopolitical uncertainty) along with hedging motives from western ETFs, EMs, and private investors, the extreme surge in silver remains questionable.

The divergence suggests that silver’s outperformance is increasingly liquidity- and positioning-driven, leaving the market vulnerable to a sudden shift. Chances are the market will see increased put options and short positions trading at some point.

#silver #gold #volatility