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This story isn’t for the day trader looking to cash out with a 50-point move in silver based on what gold’s doing. There are charts and projections here, but they aren't exactly to help with nimble position-taking.
No, our aim is to assist those who wish to see silver beyond the world of gold—where it reigns as the number one metal for electrical and thermal conductivity. In that world, silver is the “real gold”, enabling a green economy of solar panels that will light up and power homes and buildings, and serving as a conduit for electric vehicle batteries, just to name a few.
In Friday’s trade, the spot price of silver hit three-week highs at $26.015 an ounce after tracking a breakout in spot gold which pierced $1,770 the first time since Feb. 26.
Chart courtesy of SK Dixit ChartingSunil Kumar Dixit of SK Dixit Charting in Kolkata, India, said the weekly chart setup for spot silver gives a “strong bullish outlook”.
Dixit added:
“Prices are positioned on the right side of important 5-week Exponential Moving Average of $25.57 and 10-week EMA of $25.72. Middle Bollinger Band is supportive at $25.87.”
“Silver is trading above the 50% level of fibonacci retracement at $25.87, thus next the target is seen at the 61.8% Fibonacci level of $26.80, as long as 38.2% Fibonacci level at 24.80 holds with a weekly close as significant support.”
Technically, that sounds superior. Yet on a daily basis, there’s nothing spectacular about these sort of silver moves that come in lockstep with gold.
What the discerning investor in silver needs to look for are the longer-term demand drivers for silver. And those are in renewable energies, including solar.
Rhona O’Connell, head of EMEA/Asia analysis at metals advisory StoneX Group, observed in a note after Thursday’s market settlement that silver’s fortunes appear wedded to gold for the immediate, foreseeable future.
McConnell said:
“When gold is not showing a discernible trend, silver tends to revert to its industrial character, but over the past quarter it has danced largely to gold’s tune.”
That said, she noted that lively industrial activity had been developing in silver with prices at below $25.
McConnell adds:
“A key here is electrification. Silver has the highest electrical (and thermal) conductivity of all metals and solar cells plus electric cars are driving demand, while supply remains largely price-inelastic.”
She also noted that the gold/silver ratio—a simple measure of the number of ounces of silver that are required to purchase one ounce of gold—has risen over the past quarter, as it would in a bear phase, but is now running into resistance just above 70/1. “Since mid-2020, it has been contracting as the improving industrial outlook has kept silver more resilient than gold.”
And nowhere is the industrial emphasis on silver greater than in the Green New Deal of President Joseph Biden.
Peter Krauth, an op-ed writer for bullion trader Kitco, observed in an article in December that there were "some big reasons why Biden could become silver’s best friend”.
Since his election win in November, the president has announced some of the most ambitious plans ever for the greening of America. Biden is targeting net-zero emissions by 2050 under a so-called Green New Deal. To jump start those goals, he intends to spend $1.7 trillion in federal money, and leverage an additional $5 trillion in private sector and local investment funds.
US Trade Representative Katherine Tai, addressing the World Trade Organization on Thursday, underscored the importance of the electric vehicle component to Biden’s clean energy plan.
Citing an example of her own work, Tai said she went out of her way to help resolve a trade dispute between SK Innovation and LG Energy Solutions, two US-based South Korean EV battery makers. Tai added:
“We need a strong, diversified, and resilient supply chain of electric vehicle batteries in America to meet the growing global demand and to expand US manufacturing of clean energy vehicles. This settlement puts the country in a stronger position to drive innovation and growth of clean energy technology.”
The Washington-based Silver Institute noted in a study that society had still much to learn about silver’s role in the ongoing green revolution.
We share some of the institute’s findings to shed light on the energy makeover the world might see in the coming years, and how silver could position itself in that transition:
Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.
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