Silver steadies below eight-year highs in the mid-$29.00s

• Spot silver is consolidating in the mid-$29.00s, just below eight-year highs set earlier in the session.
• Numerous demand metrics suggest a surge in demand, which is still being driven by Reddit linked small investors.

Spot silver (XAG/USD) has continued its recent blistering rally into a third successive day, during which time the precious metal’s spot price has surged from under $25.00 per troy ounce to, at one point during Monday’s European morning session, above the $30.00 handle, a near 20% rally. Since crossing above the 2020 high in the $29.80s and above the $30.00 level to hit eight-year highs on Monday morning, the precious metal has eased back a little to trade in the mid-$29.00s, still up more than 10% on the day.

As US trade gets underway, bulls may look to drive further upside beyond the $30.00 level, with the next significant area of resistance being the January 2013 high around $32.50. Technically speaking, there is clear air until that point. To the downside, early January 2021 highs at just below the $28.00 level ought to offer support.

Retail buyers increasingly favouring silver

Silver is being driven higher for a third straight day by a continuation of strong retail demand, as WallStreetBets Reddit retail traders turn their focus to silver markets having faced broker restrictions on trading their favourite highly shorted-stocks, such as GameStop. Numerous popular posts on the popular WallStreetBets subreddit urged retail investors to buy gold in an effort to force a short-squeeze in silver markets, which some suggest would “destroy the banks”.

Whether a short-squeeze actually would destroy the banks is unclear; according to data cited by Reuters, global short interest in silver is equivalent to about 900M ounces, which is just short of one year of global production. Banks and brokers hold most of that, adds Reuters, with about 610M ounces. However, they say that it is not clear whether they are net short on the metal or whether their bets offset very big physical holdings.

It is not only the spot price for silver that is being bid up. All sorts of alternative gauges of silver demand show a surge in interest; silver futures are up more than 10% to the mid-$29.00s and over the weekend, silver bullions and coin exchanges reportedly had to impose order restrictions. Meanwhile, retail traders continue to bid up popular silver ETFs; the iShares Silver Trust ETF (SLV) is up around 10% on Monday and the fund’s assets under management surged to over 600M troy ounces for the first time, a record jump of over 37M. Silver miners continue to do extraordinarily well also; retail favourite First Majestic Silver Corp (AG) is up another more than 20% on Monday to above $22 per share, up from around $14 per share last Wednesday.

Will the demand last?

Some analysts argue that the comparatively much more subdued interest in gold (XAU/USD is up just 1% on Monday) bodes poorly for the longevity of silver’s recent move higher. ANZ commodity strategist Soni Kumari says that “given the gold-silver ratio is at a multi-year low, we see limited room for further outperformance of silver”.