Looking to the Futures
Silver Futures Slide as London Increases Supply
Silver futures have been on a wild ride lately, surging past the previous high set back in April of 2011 at 49.82. However, over the past two days, silver has met headwinds causing a pullback that has shaken up the metals complex adding to volatility in gold.
Silver (/SIZ25) has experienced a mixture of increased speculation, industrial demand, and a liquidity squeeze in the physical product. Recently a shortage in the metal supply in the London market has caused silver to trade at a premium to the U.S. Comex futures leading to liquidity concerns. Over time, storage of silver has been increasingly allocated to ETFs. By the end of September approximately 83% of the silver in London vaults was allocated to ETFs.
As this growth in allocation increases, there is less silver available for the industrial market, leading to liquidity issues. To combat this, the U.S. and China have delivered 15-20 million troy ounces of silver to London by airplane – a delivery method typically reserved for gold, due to the transportation costs. Not all silver left China for London, some moved to India to assist with a supply shortage as their festive and wedding season continues.
Gold's (/GCZ25) wild ride continues due to speculation in the metals market. Funds have been moving to gold as increasing tariff threats between the U.S. and China drive geopolitical risks, fueling uncertainty in the global economy. Additionally, the debasement trade – a trade where investors attempt to hedge against increased government debt and decreased currency valuations by purchasing gold, silver, or even crypto-currencies like bitcoin – has been helping to fuel golds bull run.
However, over the past couple of days, a bearish tone has set in for the bullion. U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent plan to meet Wednesday in Malaysia regarding trade restrictions Beijing has placed to curb exports on rare earth minerals. President Trump also plans to meet with Xi Jinping at an economic conference next week in South Korea and although there is some ambiguity around what is to be discussed, Trump has hinted that he expects a good outcome. Investors are optimistic these meetings will decrease tension between the U.S. and China. Consequently, gold is currently down this morning and is trading about 8.5 percent off the high of 4398 that occurred just last Monday.
Technicals
Looking at the 1 year 1 day chart we can see that December silver (/SIZ25) is trading at 47.70, down just slightly by .01%. We have moved under the 20-day simple moving average, which is currently at 48.634 and still above the 50-day which is at 43.934 and the 200-day which is at 36.603. The Hightower report shows the next area of resistance at 50.217 and 53.163, with the first support hitting today at 45.723 and below there at 44.174.
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