How speculators affect silver | DiePresse.com

The global economy weakens, speculators get rid of silver paper: Experts explain why they see little chance for the silver price in the near future.

Vienna. The turnaround in interest rates creates unrest in the global financial markets. The expectations of further measures from the central banks alone trigger greater price fluctuations. Recently, many investors have speculated that the US Federal Reserve may raise interest rates less aggressively in the coming months than previously feared. The reason for this lies in the inflation rate in July, which rose by 8.5 percent year-on-year, less strongly than in the previous month.

The consequences of such reports were also visible in the markets for precious metals: the price of gold rose quite a bit. Silver prices also rose immediately after the data was released, rising to just over $20 per ounce. ounces. The reason? An interest-free investment in precious metals could thus again become more interesting in relation to buying solid bonds, especially after deduction of inflation. This results in the real interest rate, which is still negative in both the dollar and the euro area. Investors lose money with a bond investment net of inflation.

But the euphoria was short-lived. The price of silver has since fallen to $19. The development is due to several factors. Half of the demand for silver comes from industry, for example for electronic components. But the economic outlook darkens. At the end of July, the International Monetary Fund lowered its forecasts, according to which the global economy will grow by only 3.2 percent this year. This raises concerns about industrial demand.

Demand for jewelery stagnates

Demand for jewelery is also likely to stagnate this year, says Frank Schallenberger, commodity analyst at Landesbank Baden-Württemberg (LBBW), while demand for coins and bars may be slightly below last year’s level. Schallenberger believes that the total global demand for silver this year – excluding speculators – should be slightly lower than in 2021 at just over a billion ounces.

That means demand is likely to be higher than supply, which is estimated at 995 million ounces. But the profit is likely to be overcompensated by massive selling of silver ETCs (Exchange Traded Commodities), which mostly speculators enter into short-term bets, says Schallenberger. ETCs are collateralized debt securities that track the price of silver.

“So far, the upside potential for the silver price is limited, especially on the back of further interest rate hikes by the Fed and the ECB as well as the gloomy economic outlook and the continued strength of the dollar,” says LBBW. analyst. Silver, like other commodities, is traded in dollars. As the US currency appreciates, silver becomes more expensive to buy for international buyers. On a 12-month horizon, expect a silver price of $17.

Investors who want to bet on falling prices can do so with a turbo card certificate. Société Générale offers one (DE000SD5DNB8). The current leverage is two. The price of the certificate is thereby changed in relation to the underlying. If this touches or exceeds the $28.03 mark, the certificate will expire.

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Backlash as an option?

Investors looking to use current pullbacks as an access option can, for example, do so with the Best of Silver Miners index certificate from Alphabeta Access Products (DE000DA0AB06). This includes eleven silver mining stocks. The largest weighting is Wheaton Precious Metals. The Canadian company pre-finances the production projects of other mining groups and secures their future production at fixed prices. US-based SSR Mining and Canada’s Silvercorp Metals are also among the biggest holdings in the underlying index.

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