SMM: affected by the periodic liquidity tension caused by the Xinguan pneumonia epidemic, silver fell sharply from February 25 to March 19, and then rebounded quickly, coming out of the V-shaped reversal trend and basically returning to the pre-epidemic price fluctuation range. On the whole, the support of bullish factors to silver prices is stronger than the pressure of negative factors on silver prices. After the sharp rise since late March, we believe that silver still has a lot of room to rise in the medium term.

Silver is favored by the market

The safe-haven property of precious metals supports the price of silver. Despite the short-term profit-taking of investors in the silver market, ETF continued to flow in, increasing its holdings to 15990 tons from 12280 tons in early April, reflecting still strong investor bullish sentiment. From the perspective of macro fundamentals, on the one hand, there are optimistic factors in the market about the positive news about economic recovery and vaccine development, but on the other hand, geopolitical risks, trade frictions, and the deterioration of the epidemic situation in the United States have caused market concern, and the topic of risk aversion is expected to continue.

The weakness of the dollar supported the price of silver. As of 07:05 on July 15, the cumulative number of confirmed cases of new crown pneumonia reached 13435204 and the cumulative number of deaths reached 580074. Among them, the United States has the largest number of confirmed cases in the world, reaching 3541924, and the cumulative number of deaths has reached 139137. Since the resumption of the economy, the United States has faced a rebound in the epidemic even more than other economies, leading to the continued weakness of the dollar index. At the same time, in the context of the epidemic, the monetary easing of the Federal Reserve and the strengthening of US fiscal policy are not expected to change fundamentally until 2021, which suppresses not only the dollar but also real interest rates in financial markets. From the perspective of the monetary properties of precious metals, lower interest rates will make more funds flow to precious metals and support the price of silver. The real interest rate is a very important monitoring indicator of whether silver prices turn or drive changes in the future.

The ratio of gold to silver continues to decline.

From the perspective of commodity attributes, silver may face a weak situation of both supply and demand, but the decline in supply may be greater than the decline in demand, the previous accumulation cycle of silver will gradually approach the inflection point, and the fundamentals support the medium-and long-term silver price.

On the supply side, according to data released by the World Silver Association, 28.29% of the world's mineral silver comes from primary mineral silver, 35.99% from lead-zinc partners, 23.55% from copper partners, and 11.79% from associated gold deposits. This means that the supply of silver is closely related to lead, zinc and copper, and the influence of non-ferrous metals on the supply of silver is close to 60%. At present, the hype factor in the non-ferrous market is the fear of a reduction in supply as a result of overseas outbreaks. On the demand side, silver is used as conductive and welding components in electronic products, as well as brazing alloys. The World Silver Association estimates that 5G's demand for silver is about 7.5 million ounces, which is still not significant compared to the annual demand of about 1 billion ounces. The World Silver Association predicts that demand for silver in the global photovoltaic industry is expected to fall by 3%, from 98.7 million ounces to 96.1 million ounces.

In terms of the gold-to-silver ratio, the gold-to-silver ratio soared to around 130 in March due to extreme market selling-meaning 130 ounces of silver was needed to buy one ounce of gold. At present, the ratio is back below 100, but the historical average is around 60. In the long run, the upward space of silver price is much larger than that of gold in the future. Looking back at the performance of the financial markets in the later period of the 2008 financial crisis, under the environment of policy increase and commodity inflation, the overall performance of silver with stronger commodity attributes is stronger than that of gold.

In short, in the context of the epidemic, macro factors drive precious metal prices as a whole in a bull market atmosphere, and silver prices may have a brighter performance in the future under the expectation that supply may be weaker than demand.

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