he London Bullion Market Association (LBMA) has identified silver as the top performer among metals this year, considering that the commodity has garnered increased attention from investors over the past few days.
The precious metal was up 20% in just three days, before correcting lower with a social media squeeze, global metal markets news agency Metals Daily CEO Ross Norman said during an LBMA webinar on February 4.
A lot of the driving force behind silver has been the investment demand, while for the bulk of 2020, a big increase of over 8 000 t was seen in silver exchange-traded funds (ETFs) for the full year.
This momentum has continued into January 2021, commented Standard Chartered Precious Metals Research executive director Suki Cooper, who noted that there had also been a continued build-up in retail interest.
“It’s been that surge in retail interest that’s really driven silver prices. So much so, that we saw silver prices testing an eight-year high on [February 1].”
However, HSBC chief precious metals analyst James Steel said silver attracted a wider audience partly because it was more cost effective than gold, and partly because “people understand silver better”.
“If you look at silver's liquidity, it is thinner than gold but deeper than equities being pushed higher. Also, silver doesn't have that same short positioning [as some of the other] equities did. That's why we began to see the pullback," he elaborated.
UBS precious metals strategist Joni Teves, meanwhile, noted that investors had been “friendlier” to silver given its industrial properties, even before the recent spike. Even though this new interest would likely not immediately translate into higher prices, it was likely to occur in the medium to long term, she added.
Silver, however, does have the potential to outperform gold in an environment where industrial demand was expected to recover, Teves noted, adding that the social media trend also revealed “just how liquid” the silver market was.
Considering that silver was a well-supplied market, with more than a year’s worth of inventory, Cooper said some “tightness in the near term” could be expected if the retail industry started to unload..