“At this juncture, we are not interested in asserting upside exposure to silver because we think that it will continue to underperform gold in the coming months due to its weaker safe-haven characters,” the research firm said in a Seeking Alpha post last week.
Silver has been in “a clear downtrend” since February and that is unlikely to change in the coming months, said Orchid Research.
On top of that, there is a high risk of speculative positioning in silver turning even more bearish and leading to another sell-off.
“Specs are net short Comex silver, but the net short fund position is small compared to its historical low, leaving plenty of room for aggressive speculative selling,” the firm said. “ETF investors slashed significantly their holdings last week, at the fastest pace since January 2019. Silver ETF holdings declined for the first time in six weeks.”
Also, future demand is uncertain at the moment, Orchid Research pointed out, noting that increased silver coin sales in April could be just a temporary reversal.
“After a marked decline in silver coin sales at Perth Mint in January (-22% YoY), February (-41% YoY), and March (-4% YoY), sales nearly doubled in April, narrowing the year-to-date sales decline to 7% YoY,” the firm stated.
In the meantime, the research firm advises traders to be patient with silver, highlighting that it is the best approach to the precious metal at the moment.
July Comex silver prices were last trading at $14.34, up 0.14% on the day.
The iShares Silver Trust (SLV) was trading at $13.53 per share on Wednesday afternoon, up $0.07 (+0.52%). Year-to-date, SLV has declined -15.38%, versus a 4.23% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Kitco News.