Silver to the Moon?

January 31, 2021

Underlying fundamentals continue to make silver a good bet. According to the Silver Institute, global silver supply has been in steady decline from a peak of 1.064B oz in 2014 to 980M oz in 2020. Lower demand over that same period has kept prices low, but that seems to be changing.

Recent social media interest in silver means physical demand could eclipse supply for the first time since 2015, when prices bottomed around $14 before rising over 100% in five years.

Unlike 2015, silver now has the power of millions of Reddit and Twitter users who believe silver is nearing a short squeeze. Silver may be the most shorted precious metal, but it's debatable whether a short squeeze is on the horizon. Regardless, their collective efforts have put pressure on physical supply.

Since Friday, leading silver bullion dealer APMEX has ceased silver sales due to "unprecedented demand" while JMBullion continues to report "shipping delays of 5-10 days".

And the surge in purchases of shares of SLV (iShares Silver Trust) over the last few days has further impacted the physical silver market:

- The more purchases of SLV shares, the more the Trust is forced to purchase a proportional amount of physical silver

- SLV's volume was 113,552,022 on Friday vs. 45,148,551 average over the last 30 days

- iShares Silver Trust added 34,419,524 oz of physical silver to its fund

The last time we saw this much volume, SLV leapt from $18 in July to over $27 just 3 weeks later. So silver prices are likely to break through the $27.50 resistance level this week. From a daily and weekly technical persepective, it seems prices are heading higher: