Silver Investing: China Launches New Benchmark

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Mike Hammer | October 15, 2019 10:13am NYSE:SLV

silver stock bars

Just yesterday China launched Shanghai Silver Benchmark Price Trading. Now that’s a mouthful. The new benchmark price will have the symbol SHAG on the Shanghai exchange and will trade for two short time periods daily, one in the morning and one in the afternoon. The trading unit will be 15kg per share of SHAG, but will doubtless be translated into the price per troy ounce for comparison to other world silver prices.


What it means is that the Chinese silver market will have more input into the world price of silver. And, the world will get a better view of silver demand in Asia.

The Shanghai gold price benchmark has now been around since 2016, and no one discounts the effect of Asian sentiment on the gold markets anymore. Because of China’s policies about keeping gold inside the country, the Shanghai gold benchmark does not give a complete picture of Chinese gold demand, but it has shown to signal increases in demand during times of rising prices.

Silver is not as deeply embedded in the Chinese mindset as gold, so it will be interesting to follow the relationship of this new silver benchmark to other prices around the world. Your Gold Enthusiast had an interesting new thought this morning: What if the Shanghai Silver Benchmark opens up Asian investors’ eyes to the possibilities of investing in silver? It would essentially be opening silver to a new population. And as we know, increasing market size tends to have 2 results:

First, it drives a short-term floor under prices as new market entrants establish their initial positions.

Second, it increases overall volume, which can increase volatility during times of uncertainty.

We’ll be watching to see if there is any noticeable effect on silver prices in the days and months ahead. Our initial thought is that the initial effects will be small – silver is in a quiet period right now – but this just might bring more volatility to prices in the next big market swing.

Signed,

The Gold Enthusiast

DISCLAIMER: The author holds no position in any mentioned security.  The author is long the silver sector via small positions in USLV, PAAS and SVBL. He may daytrade around these positions but has no intentions of trading out of these core positions in the next 48 hours.


The iShares Silver Trust (SLV) was trading at $16.36 per share on Tuesday morning, down $0.13 (-0.79%). Year-to-date, SLV has gained 2.31%, versus a 11.91% rise in the benchmark S&P 500 index during the same period.

SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #9 of 33 ETFs in the Precious Metals ETFs category.


About the Author: Mike Hammer

Mike HammerFor 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.


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