(Capital Economics) of Capital Macro said that volatility in the silver market is nothing new, but the impact caused by the Internet will not last.
Recently, silver prices rose above the $30 / oz mark, affected by recent attempts by US retail investors to roll short, but have since fallen sharply and fluctuated.
James O'Rourke, a commodities economist at the bank, said that many reports have linked the recent volatility of silver to the short run of US retail investors, but this is only a manifestation of the volatility nature of silver.
Although gold hit a new high last year, silver rose even more.
"rising risk aversion, extremely low real interest rates and a strong recovery in the Chinese economy in the second half of last year have boosted investment and industrial manufacturing demand for silver."
O'Rourke points out that there are not many short positions in the silver market, and that the market capitalization of the silver market as a whole is much larger than that of small-cap stocks that can be manipulated.
"CFTC data show that the silver market has been net long since mid-2019, and crucially, many of the largest silver ETF holders are banks and hedge funds, so it is unlikely that retail investors will short each other for the sake of these institutions."
In addition, the average daily trading volume of Comex silver futures and options is more than $10 billion, which is much larger than the market capitalization of companies targeted by retail investors.
More crucially, large swings in silver prices are nothing new, because the silver market is less liquid than gold, so the silver price itself is more volatile.
"in 2020 alone, there were 55 trading days with at least 5 per cent volatility in silver prices and seven days with at least 10 per cent volatility, so it is no surprise that silver prices fluctuated."
