Trading Desk
Trading treasure in the silver lake
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Martin Raab
Investment-Stratege
The wild west action in the precious metals market is electrifying traders. Within one month +65 % and +384 % since one year, the first “short bandits” are now on the scene.
After decades of calm in the “Silver Sea”, the waves started to rise last year. Recently, however, the ultimate price tsunami hit! Similar to a sudden attack by native Apaches on the prairie of the Wild West, the price of an ounce of silver has exploded – by 65% within 30 days. A world record! Looking at the chart curve, it was hard not to get the impression that silver was on the verge of rearranging the periodic table.
The rise was partly due to fundamental factors. Rising industrial demand in various sectors. Historically, industrial demand accounts for 50-60% of global silver demand (electronics, data center equipment, solar technology and, of course, electromobility). These structural drivers remain strong. However, similar to the world-famous adventure novels by German author Karl May, a feverish treasure hunter mentality has been mixed into the silver price for months. Geopolitical nervousness and the well-known reflex to use precious metals as a crisis buffer have further fueled silver prices. Donald Trump’s bizarre “Greenland plan” and Fed uncertainty then led to the ultimate price explosion – as quickly as sharpened Apache arrows.
Silver is now moving in absolutely adventurous price spheres. The technical indicators are sending signals that could politely be described as “ambitious”. RSI and MACD look like mustangs gone wild. Anyone who takes the trouble to analyze the latest ETF flows in silver products will rub their eyes: there is a conspicuous, growing discrepancy between the headline price of currently around USD 120 and the sharply rising sell orders or sell flows. While self-proclaimed “silver influencers” continue to tell optimistic tales of USD 300 per ounce, the first hedge funds are actively exploring short positions. The first European retail traders are also rushing into the “short-bandit” camp.
One thing is clear: there will not be a hectic collapse in silver, but the bang could be loud. Currently, “short-bandits” are buying bear leverage products, shorting mini-futures and shorting well-known silver ETFs – on margin, of course. The hedge fund “Avantgarde” is even sometimes using 6- to 9-month silver futures on the CME. From a market perspective, a healthy consolidation would even be desirable, as it would allow real demand to be separated from speculative price adventures and make silver a serious underlying asset again. In any case, first-class risk management is required in real time, otherwise – as in the novel – none of the silver soldiers of fortune will be able to realize even a hint of a brilliant trading performance.
