Silver will inevitably fall in the short term.

SMM News: at present, the recovery of primary lead production, silver increment can be expected. At the same time, the silver price is high, the downstream demand is restrained, and the situation of silver accumulation is obvious. Superimposed gold and silver ratio rebounded, CFTC silver futures net long positions fell. The position price deviates, similar to the bull-bear conversion node in 2011, and the short-term silver price may fall.

Supply recovery

There are basically no large and single silver smelting enterprises in China, which are mainly associated metal products of non-ferrous metal lead. Due to the 6-month lag in the monthly silver production calculated by the National Bureau of Statistics, the primary lead production has become a good indicator for predicting the growth of silver production. Lead is divided into primary lead and recycled lead, the main difference lies in the difference of raw materials. Lead produced by smelting lead and silver concentrates is often called primary lead, while lead from smelting products from waste batteries is called recycled lead.

In the first half of the year, primary lead production was not continuously disturbed by the COVID-19 epidemic. According to statistics, primary lead production fell by 5% in the first quarter compared with the same period last year, but production recovered rapidly in the second quarter, rising 3% year-on-year by the end of July. As a result of the epidemic, the traditional way of recycling waste batteries was blocked, the superimposed silver price warmed up rapidly, and the production enthusiasm of primary lead smelters increased significantly. Therefore, with the resumption of work and production in China, the output of silver will please climb to another high-rise building.

The accumulation of storage is obvious.

The update frequency of silver inventory data is relatively fast, and it can feedback the supply and demand structure of the market in a timely manner. Silver stocks on the Shanghai Gold Exchange increased significantly, from 3363345 kg at the beginning of the year to 5272050 kg on Aug. 28, an increase of 56 per cent. In particular, since the beginning of June, inventories have continuously broken through the 4000 and 5000 tons mark, and the accumulation of stocks has accelerated. Although the daily convenient delivery system "plays an important role", it also shows that the downstream does not recognize high-priced silver and demand is restrained. This causes the holder to actively sell the goods on the disk to register the warehouse receipt in order to maintain the cash flow of the enterprise. Supply exceeds demand, dragging down the price of silver.

The ratio of gold to silver rebounded

Since 1968, the rising trend of the ratio of gold to silver is obvious, indicating that the value property of gold is better than that of silver. At present, the gold-silver ratio is below 70, down nearly 12.5% from 80 at the beginning of the year, setting a new low for the year. From the supply and demand side analysis, gold has central bank reserve endorsement. All the rising logic of silver can be covered by gold, so the irrational strength of silver over gold may dissipate in the context of oversupply.

At the same time, the silver ETF position is high, but the position change lags behind the price change, indicating that the silver price rise is difficult to continue. Based on the analysis of the silver bull-bear transition node in 2011, we find that the silver price climbed to an all-time high in May 2011, but the net long position did not exceed the previous high, showing a deviation, which is similar to the current silver market.

In short, silver as a light luxury accessories, consumers are very sensitive to price. The structure of oversupply of silver will depress the price of silver. The short-term gold-silver ratio is low during the year, coupled with the continued decline in net long positions in CFTC silver futures, indicating that silver prices will continue to fall.

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