Short-squeeze is impossible? Goldman Sachs: Silver is still the best choice for precious metals!
A huge silver squeeze seems to have come to the end of the war.
After Japan broke the US$30 mark on Monday, February 1, the price of silver has quickly fallen by more than 10% from the high point, and both spot and futures prices have fallen to around US$26.
Earlier, the price of silver “flew to the sky” overnight. Many voices in the market believed that this was in line with the call of some users of WallStreetBets (WSB), the U.S. retail home base, to “launch the largest silver short-squeeze in history” and to suppress those who were deemed to manipulate silver prices. Home-related to Wall Street.
Later, some WSB users voiced that only three WSB hot posts mentioned silver, and they all warned retail investors to stay away from silver. Therefore, this time, unlike the game station (GME) battle, the silver squeeze is the result of hedge funds using retail investors instead of retail investors.
However, regardless of whether the mastermind behind the scenes is a retail investor or an institution, in the view of the Goldman Sachs analyst Jeffrey Currie’s team, the plan of rolling blank silver is absolutely impossible to achieve, but there is still room for silver prices to rise in the future.
Goldman Sachs said that looking back at the time when the Hunter Brothers monopolized the silver market in the 1980s when they owned nearly one-third of the global silver supply, they pushed the price of silver to soar by 713% within three weeks.
But if you want to replicate the same “feat”, 5 million WSB users need everyone to own nearly 4,600 ounces of silver, and all work together.
Even if this can be achieved, given the current regulations that the size of silver positions must be limited to 7.5 million ounces, if retail investors want to control COMEX’s exchange inventory, the positions will need to be divided into 53 shares, each worth $217 million.
Therefore, no one can monopolize the silver market.
According to Goldman Sachs, in the current environment, retail investors rushing into the silver market have led to a surge in silver investment behaviour, which will only increase volatility and cause smaller regional chaos in supply and demand. Moreover, the supply of silver is currently abundant, so Goldman Sachs does not believe that it is forced. Empty valid.
Moreover, for bulk commodities, an oral position is a promise that the physical commodity will be delivered on the agreed date. To be short in the bulk commodity market, investors need to have a considerable share of the commodity in the actual spot market. It is not enough to expand short positions alone.
Although some short positions are speculative players and need to cover their positions before expiry, most short positions are actually driven by the strategy of industrial manufacturers to hedge their forward returns.
This also means that when short positions in bulk commodities are generally supported by physical inventories, subsequent buying and squeezing will not occur.
How do the silver prices go?
For Goldman Sachs, silver is still the top choice among precious metals. The bank said that if the Biden government can really promote solar power generation, the silver target price is 30 or 33 US dollars per ounce.
First, silver benefited from a weaker U.S. dollar and industrial recovery led by green energy. With the recovery of global industrial output and the strengthening of the development momentum of the solar energy industry, silver has always performed better than gold, but the liquidity of the silver market is much lower than that of gold.
Last summer, when the price of silver rose by 50%, $6 billion of funds flowed into the silver ETF. Therefore, Goldman Sachs said that if enough positions enter the futures market, the price of silver may exceed its basic value.
Gold Core, a precious metals trading platform, believes that considering that the price of silver has reached a turning point, real interest rates remain low, central banks of advanced economies will continue to purchase government debt, industrial demand will increase, and the demand for jewellery and silverware will also increase. It is used in disinfection and medical industries. With the seven major factors that silver demand and silver mine supply decrease, silver prices will still have some support in the future.
Among them, Gold Core believes that the reopening of western economies and the large-scale production of renewable energy will drive the automotive industry and other industrial uses to increase the demand for solar panels.
Solar photovoltaics are vital to future silver demand. A recent World Bank report predicts that by 2050, the consumption of silver in energy technology may increase dramatically, reaching more than 50% of the current total demand for silver.